Legg Mason's Bill Miller may have lost 20 percent of his investment in bitcoin, but he's still bullish on its potential.The money manager told CNBC on Thursday he bought into the cryptocurrency after its biggest exchange, Mt.Gox, collapsed earlier this year.Miller, chairman and chief investment officer at Legg Mason Capital Management, said bitcoin makes sense when investors look at its risks versus rewards.The payoffs would be huge if the digital currency can obtain a small fraction of gold's market share, he said.Bitcoin prices exploded last year just past $1,100 only to hit several potholes in recent weeks.Bitcoins traded at $410 on Thursday morning, according to exchange bitstamp.net."You can't go buy anything with gold today in the United States," Miller said on "Squawk Box.""If it becomes only 10 percent as popular as gold, then it's an $800 billion market value.You can lose 100 percent of your money, or you can make 120 times your money.I think the risk reward is OK."Miller commented on billionaire Warren Buffett's description of bitcoin as a "mirage" last month on "Squawk Box."

Miller said Buffett was right about bitcoin's potential as a means of money transfers or payments.Beside that, he said, Buffett had a "logical flaw in his thinking."Read MoreBuffett blasts bitcoin as 'mirage': 'Stay away!'Comparing bitcoin to checks or money orders doesn't take into account the hard limit of 21 million bitcoins that its inventors have placed on its global supply, Miller added."If there were 21 million checks in the world and that's all there were, checks would be very very valuable," Miller said.Miler disclosed another one of his investments during his "Squawk Box" interview: subprime mortgage servicers such as Nationstar."We think subprime, which was a disaster before, is a growth area now," Miller said.Miller holds 30 percent of his portfolio in financial stocks, such as Bank of America and Citigroup.He mentioned Springleaf, a reconstituted subprime lender, as a stock to watch.Miller said he owns a stake in subprime mortgage servicer Nationstar.He said both companies were benefiting from bigger banks selling their mortgage servicing rights because of higher capital requirements.

Read MoreFed's hard line to bring more pain to Wall Street Miller said he hopes Citi sells its subprime unit to Springleaf."That would be good for both companies," Miller said.Miller also said the market's current conditions meet the criteria for a strong year.He named three pillars needed for a sustained rally: liquidity, growth and valuations.He said the stock market should show positive progress in each area throughout the year.The recent selloff "made everything in the market a dart board that you could buy in my opinion, and do well in the next few months," Miller said."The conditions for a bear market aren't in evidence."Asked how to put a number on how confident he felt about the stock market's prospects, Miller said "eight, nine, 10," before cautioning that his forecasts only applied to the next year or two."After that it gets murkier," Miller said.Disclosure: Miller's fund owns shares of Citigroup.—By CNBC's Jeff Morganteen.Morning Squawk: Sign up to get Morning Squawk each weekday Job Industry Advertising/Marketing Automotive Communications/PR Construction/Manufacturing Education Finance/Banking/Insurance Legal Media/Entertainment Medical/Health Care Mining/Oil/Gas/Utilities Gov't/Non-Profit Real Estate Retail Technology/IT Transportation/Shipping Travel/Hospitality Other Get this delivered to your inbox, and more info about about our products and service.

In an interview on CNBC's popular morning program 'Squawk Box', Legg Mason's Bill Miller dismissed Warren Buffett's statements on bitcoin as flawed.stripe bitcoin blogThe former Legg Mason CFA, chairman and CIO, and current portfolio manager for the Legg Mason Capital Management Trust reiterated his support for bitcoin, directly addressing the legendary investor's opinions on the subject in the process.bitcoin sweden taxBuffett has been outspoken in his views about bitcoin as an investment, calling its value a 'mirage' and urging investors to 'stay away’ from the digital currency, though his statements have suggested he sees value in bitcoin's underlying technology.bitcoin html tickerIn contrast, Miller has been open about owning bitcoin and what he sees as its potential to maintain and grow its value long-term.bitcoin exchange founder dead

Now, guest host @billmiller_lmm tells us why he's bullish on #bitcoin #thelastword — Squawk Box (@SquawkCNBC) April 10, 2014 Overall, Miller was respectful when disagreeing with Buffett, though he suggested that the investor's thinking on the matter was misguided, stating: "I have enormous regard for Warren, but I think there's a logical flaw in his thinking here.bitcoin ruling marchIt may very well be the case that bitcoin is worth nothing, but I think it's a really interesting intellectual and technological experiment."bitcoin mining gearMiller's support is also notable considering that he has actually lost money investing in bitcoin, as he reported that his BTC holdings have declined 20% to date.mine litecoin or dogecoin— Squawk Box (@SquawkCNBC) April 10, 2014 In his 14th March interview on CNBC, Buffett compared bitcoin to checks or money orders, arguing that since its primary value was as a payment system, the idea that it could be a worthwhile investment was incorrect.bitcoin miner jual

However, notably, Miller took direct aim at these statements on CNBC: "[Checks] have no value because they are infinitely creatable.bitcoin heraldThere are 12m bitcoins out there and there will [only ever] be 21m.If there were 21m checks in the world and that was all there were, and all transactions went through checks, checks would be very, very valuable."Still, Miller agreed with Buffett on his point that the main benefit of bitcoin was its use as a payment system."I think he had it exactly right in that its main value, potentially, is as a payment system.[It's] potentially disruptive as you can send it anonymously, you can send it without paying the interchange fees and that kind of thing."Miller also weighed in on the subject of whether bitcoin could face competition from any of its available alternatives, citing the popular theory of path dependance, which attempts to explain why the first-to-market solution is often the one that becomes most widely used.

Miller listed historical examples of this phenomenon, noting that the most efficient or best ideas don't always win out.Specifically, he cited the fact that "beta was better than VHS", and that "the QWERTY keyboard was not the most efficient way to type"."Once you reach a certain state, it becomes very difficult to dislodge that.I think bitcoin has probably won that, less so cryptocurrencies."Miller also weighed in on why bitcoin is a preferable investment to gold.You can buy things with #bitcoin, you can't buy anything with gold these days -@billmiller_lmm to @CNBC — Squawk Box (@SquawkCNBC) April 10, 2014 Miller has achieved notable successes during his lengthy career at Legg Mason, most recently when overseeing the Legg Mason Opportunity Trust, a fund that focuses on assets with large gaps between price and intrinsic value.In 2013, the fund was number one in The Wall Street Journal's ranking of diversified US-stock mutual funds with more than $50m in assets for three straight quarters, according to MarketWatch.