Morgan Creek Digital Makes $1M Buffett-Style Bet on Crypto to Beat Stocks

Published on January 1, 2019 by Cryptovest Staff

Morgan Creek Digital has announced Buffett Bet 2.0 — a $1 million wager that its crypto index will beat the S&P 500 over the next decade.

Digital asset investment firm Morgan Creek Digital has placed a $1 million bet that its Bitcoin-focused Digital Asset Index Fund will outperform the S&P 500 over the next decade, CNBC reported. Dubbed Buffett Bet 2.0, the challenge mimics the famous wager by one of the world’s most notable critics, Warren Buffett.

Morgan Creek Digital believes that its index of ten major cryptocurrencies — Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH), Litecoin (LTC), EOS (EOS), Monero (XMR), Zcash (ZEC), Dash (DASH), NEM (NEM) and IOTA (MIOTA) — will prove to be a better investment than the stocks of the 500 biggest US publicly traded companies.

The bet will begin on January 1, 2019 and conclude in 2029. It is expected to be taken by “someone who is bullish on the S&P 500, or someone who thinks cryptocurrencies are worthless or overvalued,” Morgan Creek Digital co-founder Anthony Pompliano told CNBC in an interview on Thursday.

Morgan Creek partners will use personal money to fund their side of the $1 million bet. None of the stake will come from the fund itself. The firm says it plans to donate the proceeds to charity and expects whoever decides to take the bet to do the same.

“This is a combination of our outlook not only for the upside of cryptocurrencies but also the outlook on public equities. 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 aren’t exactly at their all time highs either,” Pompliano said.

Pompliano further pointed to the so-called FANG stocks (Facebook, Amazon, Netflix, and Google), which have taken a beating recently. Facebook is leading the tech majors downslide, with a 24% fall year-on-year. However, these losses are dwarfed by the over 70% slump of digital currencies from their all-time highs last December. Year to date, Morgan Creek’s Digital Asset Index Fund is down 79.4%, while the S&P 500 is up 0.84% over the same period.

The high crypto market volatility and unpredictable price plunges have led to Buffett dismissing cryptocurrencies as gambling and describing Bitcoin as “rat poison squared” and something creating no value whatsoever. A prominent crypto critic, the billionaire investor made a $1 million bet in 2007 that the S&P 500 performance over the next decade would beat that of a group of various hedge funds. Buffett won the bet in 2017 and donated the proceeds to charity.