The 5 year BTC vs. ETH bet with Sunnydecree
The backstory
A month ago (October 2023) Sunny started a 100 CHF a day dollar cost averaging (DCA) plan into Bitcoin with Relai until Bitcoin reaches its All Time high again. I thought it was a fun (and +EV!) idea so I decided to join. To make things a little bit more interesting (and because I thought it was even higher EV) I did the same with ETH. Even if we didn’t make the bet back then, it was clear that we are going to compare our DCA portfolios regularly in the future..
A Crypto Bro dick measuring contest!
One month later he posted the first screenshot of his accumulated Bitcoins stack. Of course I replied with my ETH stack (it was slightly longer,…ummm…higher, I mean higher!).
That triggered him to do the bet….
The bet
Sunny is convinced that BTC will outperform ETH over the next five years, I think the opposite. We came to an agreement to not make the portfolio value of this DCA plan the subject of the bet (since we will probably stop before 5 years are over). Instead we will just take the ETHBTC performance.
Yes, 1 BTC is a lot of money to spend on a Twitter debate, but remember: Just by holding more BTC than ETH, he already made the bet that BTC will outperform ETH, so basically he just increased his position for that bet. Same for me.
The terms
The winner of the bet gets 1 Bitcoin (BTC) from the loser.
We are betting on the ETHBTC pair. Currently you can buy 1 ETH for 0,056 BTC. If in five years on 2028-11-13 the price for 1 ETH is higher than 0,056 BTC, I win the bet. If it’s lower he wins.
We are currently looking for an arbiter who will decide the bet and keep both wagers (2 BTC) secure until 2028.
The reactions
Twitter (X) loves controversy. Of course both of our replies are filled with people telling us (both) how stupid we are and how easy one of us will win this bet. The truth is: Nobody knows how the next 5 years will play out. Everyone who is “sure” about one outcome or the other is just a talking head.
But that’s the beauty of bets like this: I don’t have to be sure! I just need to have more than 50%(*) probability that I will win for the bet to be +EV for me. If the actual propability is 70% I will still lose 30% of the time but the bet is hugely profitable (statistically speaking).
The data
As a data & chart guy of course the first thing that came to my mind was: How would this bet have played out in the past? Even though the past performance will not determine the future it is the best way to estimate the aforementioned propability based on numbers.
Five year returns of ETH vs. BTC
The following chart shows the ROI of holding Ether vs. Bitcoin for five years. Green means it would have been profitable to hold ETH for five years, red means Bitcoin outperformed Ether over the preceding five years.
OK, so green in 2028 means I win, red means I lose. Let’s look at the percentage of the time the chart was in the green and the red area?
| Timeframe | % in green | % in red |
|---|---|---|
| 2020 | 100% | 0% |
| 2021 | 99,4% | 0,6% |
| 2022 | 70,4% | 29,6% |
| Since 2021 | 73,9% | 26,1% |
| Since 2022 | 60,3% | 39,7% |
| Since 2023 | 48,7% | 51,3% |
| Full Time | 77,1% | 22,9% |
So there is only one year in the history of the 5 year ETHBTC returns that was red for more than 50% of the time and that is 2023, and it looks like that will flippen until the end of the year.
Conclusion
I like my chances! The 5 year ETHBTC Chart was in the green for more than 3/4 of its time. Even disregarding the beginning of ETH with its huge price appreciation, it is on its way to print the third predominantly green year in a row.
But of course there are a multitude of reason why I could lose the bet but remember: All I need is +EV now to make it a good bet.
Wish you best of luck Sunny!
Update 2024-11-23
Today marks the first anniversary of the 5 years bet and boy does it not look good for me. Except for a couple of days in early 2024 I am down bad. Ethereum lost 35% against Bitcoin in the first year. I am still somewhat optimistic about the bet but I definitely would not bet again. Bitcoin was a BEAST in 2024… When prices went down Bitcoin was not as much affected as Ethereum and if prices went up Ethereum could barely keep up. If there is no major narrative shift I almost expect this trend to continue. See you next year.
*actually I need more than 50% since the payout of the bet is in BTC. If he wins, he wins more than me (since 1BTC is more valuable in regards to ETH then). If I win BTC will have depreciated vs ETH and is therefore not as valuable. But 1 BTC is 1 BTC right? RIGHT?
