Hedge fund titan Cliff Asness, founder of AQR Capital Management, reflects on the “costly mistakes” of investing in U.S. equities, private equity, and Bitcoin over the next decade.
Asness presents his warning from a future perspective. He foresees the downfall of Bitcoin and paints a picture of institutional investors’ reckless plunge into the crypto market. Specifically, he offers a humorous yet sobering glimpse into the consequences of speculative bubbles.
Critics View Bitcoin from a 2035 Perspective
In the lengthy article, Asness paints the case of a firm’s hesitant dive into cryptocurrency. Initially dismissive of Bitcoin’s value and viewing it as “silly,” the institutional investor eventually succumbed to the hype when Bitcoin hit the $100,000 mark in late 2024.
Their initial hesitation turned into fervent enthusiasm as they became convinced they had missed out on “the next big thing.”
“We realized we had missed out on the next big thing and that leaving computers running did build digital gold,” writes Asness sarcastically.
He describes what followed as a classic case of institutional FOMO (fear of missing out). Specifically, Asness details how the firm’s portfolio managers ramped up their position to 10% of the portfolio after Bitcoin’s price spiked from $100,000 to $250,000—driven, in his view, by “rumors” of government strategic reserve and an Elon Musk tweet.
“We added a 5% allocation in late 2024 at a $100K Bitcoin and doubled up the very next year when it went up to $250,000,” he said sarcastically.
The Crash to $10,000
However, by 2035, Asness paints a starkly different picture. Bitcoin, once hailed as the future of money, has crashed to around $10,000, leaving many investors holding the bag.
According to him, the only positive takeaway would be the diversified crypto allocation. He speculated a scenario where the institution had put 90% in Bitcoin and 10% in a lesser-known cryptocurrency, humorously referred to as “Fartcoin,” which ended up being one of “the only coins still holding any real value by 2035.”
The “Levered Bitcoin Play” Fail
Furthermore, Asness also targets another failed strategy involving a Bitcoin-related stock—something he called a “levered Bitcoin play,” which, according to him, turned out to be disastrous.
The stock, designed to magnify the price movements of Bitcoin, was bought at a significant premium, only to plummet as Bitcoin’s value fell.
Asness mocks the misguided belief that such an investment could offer any “arbitrage,” describing it as akin to “Russian Roulette.”
“Sadly, the only thing that worked for us was staying away from the more ludicrous investments, like the levered Bitcoin play,” he wrote.
The End of the Crypto Dream?
Asness’ reflections on the wild ride of crypto investments over the next decade look to offer a sobering reminder of the dangers of speculative bubbles.
In his view, in ten years, many institutional investors may realize that the Bitcoin dream would have turned into a costly nightmare.
Moreover, he suggests that by then, while some diehard believers may still remain in the cryptocurrency space, the majority will have learned a hard lesson.
“Fool us once, shame on you. Fool us twice, shame on us!” Asness concludes.
Meanwhile, he admits that his article is merely based on fictitious investment outcomes of the future, with no guarantee that it will unfold as he has painted it.
However, the crypto community has dismissed the critique as just another in a long list of tirades against Bitcoin by skeptics.
X user Peter remarked that critics have lost the battle of writing Bitcoin obituaries in the present tense and have now resorted to predicting its demise a decade in the future.
While Asness forecasts the death of Bitcoin within ten years, looking back at the past decade, Bitcoin has only continued to grow stronger.
So people finally got tired of (being made fun of) writing Bitcoin obituaries in the present tense, so they started writing them for 10 years in the future?
Well, we can’t make fun of them for 10 years, but trust we will make fun of them in 10 years. I’m sure they’ll victory lap…
— Peter (@cryptopeterb) January 2, 2025
