The crypto market is the newest yet the most volatile industry currently. The recent plunges brought all cryptos to their lowest levels in approximately 13 months. Bitcoin had its worst month in the past seven years shedding off nearly 35% in November 2018. Amidst the entire decline, a cryptocurrency asset manager Morgan Creek bet that this market will outperform the S&P 500 in ten years.
Morgan Creek Digital is mimicking the investment strategy of Warren Buffett, the most notable crypto critic. They are recreating Buffett’s famous $1 million wager involving the performance of the S&P 500 against several hedge funds. Morgan Creek believes that cryptos will outperform the S&P in a ten-year cycle and they bet $1 million on it.
Buffet Bet 2.0
The crypto investing firm has invited investors who believe in the S&P to take the other side of the wager. The co-founder and partner at Morgan Creek Digital, Anthony Pompliano, stated that anyone who takes the other side may have Buffett’s same outlook. The individual may either think that cryptos are overvalued or worthless, or someone bullish on the S&P 500.
Pompliano told CNBC in an exclusive phone interview that:
“This is a combination of our outlook not only for the upside of cryptocurrencies but also the outlook on public equities.”
He highlighted the recent losses in the FANG stocks and several other investor favorites. The once high performer tech stocks have declined lately. Facebook is leading the pack downwards with a 24% slump year over year. According to him:
“A lot of people might look at this and just think we’re bullish on crypto — but you need to look at what asset we’re going up against. Public equities are not exactly at their all-time highs either.”
The Crypto Losses
The losses by the tech stocks look minor when the cryptos are put into context. Bitcoin, the largest and most popular crypto worldwide, lost 37% in November 2018 alone. Additionally, it has dropped over 73% this year after rising to almost $20,000 last December. The high volatility and unpredictable plunges led to Buffett referring to the crypto market as “rat poison squared.”
Pompliano and other Morgan Creek partners are funding their $1 million bet personally without involving the fund itself. Despite the market plunges, they are confident that they will win this bet.
The Growth Drivers
The rumored Facebook crypto and other underlying factors prompted Morgan Creek to wager that cryptos will overshadow S&P 500. Pompliano also referenced a post outlining how BTC’s fundamentals would effectively support its growth as an asset class. He noted that the crypto space will thrive as a whole although the post focused on bitcoin alone.
Furthermore, the number of nodes and wallets supporting the network continue to grow. Their intention is for the winner to donate the proceeds to charity.