Anthony “Pomp” Pompliano, co-founder of Morgan Creek Digital Assets, recently published a tweet with which he claims that, in the last 10 years, keeping 99% of money in fiat cash, and investing the remaining 1% in Bitcoin, would have brought greater gains compared to investing in the stock market, despite the bull run of the latter in the same period.
Holding 99% cash and 1% Bitcoin over the last 10 years was a better investment than investing in the greatest stock market bull run in history.
Crypto will outperform stocks for next 10 years too. https://t.co/KPVr4ymN4X
— Pomp 🌪 (@APompliano) February 3, 2019
He also mentions another tweet in which a chart is shown clarifying this comparison.
Assuming an investment $1,250 at the beginning of 2010, the chart compares the gains of four different strategies.
Two of these strategies involve investing all of the capital in shares of the S&P500, while the other two involve holding 99% of the capital in US dollars and investing only the remaining 1% in Bitcoin.
In both cases, the results favour the second strategy.
In particular, the first investment strategy with the S&P500 would have led to a return of 9.6%, while the first with Bitcoin would have led to a return of 10.3%.
The tweet also underlines that the strategy of investing only 1% of the capital in Bitcoin, keeping the remaining 99% liquid, would not only have had a higher return but also lower risk, thus a better risk/return ratio.
Pompliano then concludes by saying that
“Crypto will outperform stocks for the next 10 years too”.
This is obviously a provocation, or rather purely theoretical reasoning, since in reality nobody, or almost nobody, invested 1% of their capital in Bitcoin in 2010. Moreover, Bitcoin was worth almost nothing at the time, so only with hindsight can we say that it would have been such a high-performance investment.
However, it is the final statement that could have concrete real implications. In fact, it could be true that in the next 10 years the crypto market will be able to outperform, on average, that of shares, however, also the risks would be greater.
If the comparison is made between two investments of equal sizes, such as 100% of capital, the return on an investment in the crypto market could be higher than that generated by an investment in shares of the S&P500, but also the risk would be higher.