Category Archives: Digital Asset Index Fund

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Morgan Creek Founder Seeks $1 Million Bet on Crypto Outperforming S&P 500

Morgan Creek Founder Seeks  Million Bet on Crypto Outperforming S&P 500

Morgan Creek founder Anthony Pompliano is looking to make a USD 1 million bet that the Digital Asset Index Fund, a weighted average of major cryptocurrencies, will outperform the S&P 500 over the next ten years.

Pompliano is hoping a cryptocurrency skeptic will take up his bet, due to start on 1 January 2019 and end on 1 January 2029.

It takes obvious inspiration from Warren Buffet’s infamous USD 1 million bet that the S&P 500 would outperform a collection of hedge funds. In January 2018, Buffet won the bet. One might be inclined to suggest the American business tycoon be the opponent in this new bet, taking into account that Buffet notoriously has labeled Bitcoin as “rat poison squared” and insisted it has no intrinsic value.

The Digital Asset Index Fund will be the basis for this bet, rather than betting purely on Bitcoin. This index is a combination of Bitcoin, Ethereum, Litecoin, Bitcoin  Cash, EOS, Monero, Zcash, Dash, IOTA, and NEM. The fund reconstitutes monthly to capture the evolving market, so even if some of these cryptocurrencies were to be devalued ten years from now, the negative impact should be minimal. Overall, the fund serves as a good proxy for the overall crypto market. Likewise, the S&P 500 is a good proxy for the overall stock market and it reconstitutes periodically as well to capture the evolution of the stock market.

Pompliano says, “It [cryptocurrency] outperformed over the last 10 years and we believe that will not change moving forward for the next 10 years.”

Indeed, Bitcoin has risen from USD 0.01 to USD 3,250 as of 7 December 2018, and went as high as USD 20,000 in December 2018, outperforming all other asset classes.


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Bitwise, Morgan Creek Set Up Digital Asset Index Fund

Morgan Creek Digital Assets and Bitwise Asset Management, two well-known cryptocurrency hedge funds, have launched the Digital Asset Index Fund to give institutional investors a safe, regulated and efficient way of investing in the crypto markets.

An index fund like this provides a better alternative to exchange-traded funds (ETFs), especially since it is backed by actual cryptocurrency and, therefore, directly impacts spot crypto demand. The launch illustrates how crypto hedge funds can provide the infrastructure institutional investors need amid the rapid growth in the number of hedge funds to 466. Some believe this is far more important than the approval of a Bitcoin ETF in the US.

The Digital Asset Index Fund covers 75% of the crypto markets, according to market cap and includes Bitcoin, Ethereum, Bitcoin Cash, EOS, Litecoin, Dash, Zcash, Monero, Ethereum Classic and OmiseGo. Some 85% of the fund consists of Bitcoin and Ethereum, essentially bulking up with main cryptocurrencies with some slight diversification into others. The weighting for each crypto in the index fund is re-calculated every month to account for changes in market caps.

Ripple is specifically excluded from the Digital Asset Index Fund because Ripple Labs and the Ripple Foundation control more than half of its supply. The token is often excluded from crypto rankings due to this but when included, it is third in the ranks with a market cap of USD 14 billion. Stellar isn’t included in this index fund either, although the reasons for that are unclear.

This Digital Asset Index Fund is similar to the Coinbase Index Fund which launched in June 2018. The latter includes fewer cryptocurrencies, however, with only Bitcoin, Litecoin, Ethereum, Bitcoin Cash and Ethereum Classic being accounted for. The Coinbase Index Fund requires a minimum investment of USD 250,000, while Bitwise’s minimum investment is a relatively smaller USD 50,000. Both index funds require investors to be accredited in the US.


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