Morgan Creek Digital, the cryptocurrency affiliate of Morgan Creek Capital Management, a firm with $1.5 billion under management, has recently bet $1 million that bitcoin, the flagship cryptocurrency, will outperform the S&P 500 index over the next 10 years.
According to Bloomberg, Morgan Creek is challenging those who claim cryptocurrencies are worthless, or that equities are a better investment. If it loses, the firm’s partners will pay $1 million to whoever accepts the bet, and it will select one single investor for the bet. Its goal is to see the winner donate the funds to charity.
Specifically, Morgan Creek’s wager revolved around the Digital Asset Index Fund, which tracks the price performance of top cryptocurrencies like bitcoin, bitcoin cash, EOS, litecoin, and Ethereum’s ether. For the firm to win, it will have to outperform the S&P 500 over the next 10 years, starting on January 1.
The firm called the bet “Buffet Bet 2.0,” as it recreates a bet Warren Buffet did with Ted Seides, that the S&P 500 would outperform a portfolio of hedge funds. Buffet won his bet. The billionaire investor is notably a bitcoin bear, however, as he has claimed cryptos will come to a “bad ending,” and claimed it is “probably rat poison squared.”
According to Bloomberg Anthony Pompliano, a partner and the founder of Morgan Creek Digital, stated:
Bitcoin and crypto assets have been the best-performing asset for the last 10 years. They have beat the S&P 500, and we believe they will continue to do so for the next 10 years.
Speaking to CNBC Pompliano added that the bet is a “combination of our outlook not only for the upside of cryptocurrencies but also the outlook on public equities.” He noted public equities “aren’t exactly at their all time highs either,” and pointed to recent losses in FANG [Facebook, Amazon, Netflix, and Google] stocks.
The bet comes as bitcoin has been enduring a months-long bearish trend that has seen its value drop below its September 2017 low. According to CryptoCompare data, the cryptocurrency is currently trading at about $3,390 after falling 9.8% in the last 24-hour period.
Some analysts have claimed technical indicators suggest the price drop will continue in 2019. The slump just makes the bet resemble more the one Buffett was involved in, as the S&P 500 Index plummeted in 2008 and 2009 shortly after the bet was made.