$1 Million: Morgan Creek Bets Cryptos Will Outperform the S&P 500 Over the Next Decade

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.

Bitcoin’s Price Fails to Surpass $8,000 as Crypto Market Loses $12 Billion

The cryptocurrency space has recently lost about $12 billion in only 24 hours, at a time in which the flagship cryptocurrency bitcoin failed to remain above the $8,000 mark. The cryptocurrency has more than doubled in value so far this year, but is seemingly struggling to keep rising.

According to CryptoCompare data, one bitcoin is currently trading at $7,600 after falling 3.6% in the last 24-hour period. The cryptocurrency started seeing its price drop shortly after hitting $8,000, and has recovered from a $7,500 low in intraday trading.

Bitcoin's price performance in the last 24-hour period

The cryptocurrency’s price performance so far this year has seen interest in it grow, so much so that it hit a 14-month high in Google search interest this month.  Cameron Winklevoss, a co-founder of the popular Gemini cryptocurrency exchange, recently stated that investing in bitcoin is “not as crazy as sitting on the sidelines when the future of money is literally being built before your eyes.”

Despite the recent price drop, some analysts have revealed they’re bullish as BTC’s mining rewards halving event occurs next year. This, according to some, helps remind users of the cryptocurrency’s scarcity, as block rewards are cut in half.

The recent price drop could potentially be a delayed reaction to Tether, the company behind the popular USDT token, revealing it has invested some of its reserves in BTC and “other assets.” While some claim the firm bought extremely small amounts of crypto with its reserves, New York Supreme Court Judge Joel M. Cohen questioned the paradox, stating:

Tether sounded to me like sort of the calm in the storm of cryptocurrency trading. And so if Tether is backed by bitcoin, how is that consistent? If some of your assets are in a volatile currency that Tether is supposed to somehow modulate, that seems like it’s playing into what they are saying.

Bitcoin’s drop saw most top altcoins follow suit, with some dropping as much as 7% in the last 24-hour period. Litecoin, Bitcoin Cash and Zcash are among the least affected tokens, being down between 4% and 5.2%.

Ethereum’s ether, XRP, and XMR are all down by about 6% in said period, while other cryptocurrencies like Dash, Cardano, and QTUM dropped by as much as 10%. Bitcoin SV, which recently surged by 80% after Craig Wright filed a copyright registration for the Bitcoin whitepaper, is down by little over 1%.