The Big Bet!
The corner of Twitter where I mostly hang out was buzzing yesterday about a new version of the Buffett Bet from ten years ago (Warren Buffett made a $1 million wager about equities outperforming hedge funds for ten years with the proceeds going to charity and he was right). Now Mark Yusko and his partner Anthony Pompliano want to make a similar bet, believing that their Morgan Creek Digital Asset Index (a crypto index) will outperform the S&P 500 over the next ten years.
It's drawn a lot of impassioned reactions on both sides. Nouriel Roubini appears to be one of the bigger naysayers and he's become a magnet for criticism from the Digerati (no claim of originality on making up that word). My two cents as follows;
My take has pretty much been that all of this leading to safer and more efficient transactions makes sense and is bound to happen but I don't think what we know and think about cryptocurrencies today will have much relevance in the future. Ten years from now the components in Morgan Creek's index (or any other indexes out there) could turnover completely a couple of times. I continue to ask, without ever having had anyone answer, why can't all of the positive attributes and life altering benefits projected onto Bitcoin accrue to some yet to be created cryptocurrency while Bitcoin goes to zero?
If this is anywhere near as creatively destructive as proponents claim, then the odds that largest ones today could disappear entirely as they are supplanted.
I don't see how Bitcoin can come back from its latest 80% decline. There have been several 80-90% declines in the price in its history and of course with those other declines it came roaring back to make highs that were thousands of percent higher than the old highs. Part of what allowed such dramatic gains to occur was whole new waves of people who were yet to discover Bitcoin. These newbies liked what they saw and bought. In order for Bitcoin to make a new high this time it would have to do so without a new wave of people who are yet to discover it. Who is left that has not heard of Bitcoin? There is no longer a discovery factor.
As a potential diversifier, which crypto broadly speaking could evolve into, I don't think there is yet any utility. As I indicate in my Tweet, no outcome would surprise me. Buying it here is a guess, it is still a lottery ticket as I have described it previously but I don't see how someone could rely on it at this point, fully conceding that it could become reliable in the future one way or another.
I've said all along that if you want to take a flier, go ahead but size it appropriately so that the risk is asymmetric; can you afford to have $5000 go zero without ruining you but if that $5000 grew to $100,000 would that be enough to favorably impact your financial picture? If you make a bet and it grows into a life changing piece of money, sell it and let it change your life.
I don't know whether this post will make it onto anyone radar to engender some sort of emotional response either way but I would encourage you to check out what people are saying on Twitter for the simple reason that a lot of folks are bringing a lot of emotion to something where more emotion doesn't make it better.
If you see merit in some sort of asset, you should take the time to learn what the risks are too and then make a suitable decision about what to do with your money based on what is best for you. For now, crypto is a no go for my clients but that could change; emotionless. Yelling at someone on Twitter seems to be unproductive.
I see similar behavior in self improvement Twitter where LCHF (low carb/high fat) and Vegan seem to be at war with each other in a manner that is difficult to fully comprehend. I would hope that everyone cares enough about their health and fitness to learn more than they currently know in pursuit of being healthy for longer (this is healthspan versus lifespan). As with investing, you should learn the risks in any sort of diet strategy and choose what you think is best for you; emotionless.