Balaji Srinivasan's Bitcoin Bet

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James Medlock @jdcmedlock : I can finally say it: I settled the bet early with @balajis! Took some time to work out the details but he proceeded in good faith and you can see the receipt of funds on chain in the next tweet. $500k to me (so I get 30% post tax as planned) and 500k to @GiveDirectly 7:34 PM . May 2, 2023 381.1K Views 401 Retweets 285 Quotes 3,767 Likes 108 Bookmarks

Balaji @balajis THE PRINTING IS COMING It's on you, the citizen journalist. You need to make people aware. They were printing "only" $25B on March 12. Then $2T on March 16. Now it's $18T on March 21. Eventually it will be / 21M. Then you may have nothing. Unless you have Bitcoin. : THE STEALTH DEVALUATION I'm going to post these kinds of polls routinely, because things are moving extremely fast. When I put up the #Bitsignal[1] many people were denying any crisis existed. Now it is clear that a digital fire is burning, as the Federal Reserve is printing money to the tune of trillions to send to both domestic banks (via BTFP) [2,3,4] and foreign banks (via swaplines) [5,6] while publicly reassuring people that the banking system is still resilient[7]...something you'd never have to do if it really was. But in reality, they're doing a stealth devaluation of the dollar. As Dalio predicted they would, to pay unpayable debts- but at warp speed. They didn't have strategic surprise, but they did have tactical surprise. They're doing it under fog of war, in the chaos of bank runs. But whether done intentionally or not, acknowledged or not, the dollar holder is soon to become the bagholder.

$Balaji @balajis Just as in 2008, the bankers lied. This time, the central bankers, the banks, and the bank regulators have lied to all dollar holders and depositors. This isn't your typical fractional reserve situation. The problem is that there isn't enough in the banks on a mark-to-market basis to cover withdrawals. They knew this through all of last year, and communicated it internally in their coded language. It's obvious from the graphs (see below). The central banks, the banks, and the banking regulators all knew a huge crash was coming-the phrase is "unrealized losses" [1,2,3,4,5]. But they never notified you, the depositor. Instead the regulators allowed banks to hide their literal insolvency in footnotes[6], until one guy figured it out[7]. : It's Uncle Sam Bankman Fried. Just like SBF used your deposits to buy shitcoins, using accounting tricks to fool himself and others into using the money, so too did the banks. They all used the deposits to buy the ultimate shitcoin: long-dated US Treasuries. And they all got rekt at the same time, in the same way, because they bought the same asset from the same vendor who devalued it at the same time: the Fed. Specifically, as NYT admitted, banks "binged" on enormous amounts of Treasuries and other long-term bonds in 2021 when the flood of printed$

Balaji @balajis I will take that bet. You buy 1 BTC. I will send $1M USD. : This is ~40:1 odds as 1 BTC is worth ~$26k. The term is 90 days. All we need is a mutually agreed custodian who will still be there to settle this in the event of digital dollar devaluation. If someone knows how to do this with a smart contract, we can do it on chain, so I can send USDC. If you won't do that, name a custodian. #BitSignal B

Dave Troy @davetroy Yeah. This has been the plan all along. And Putin and Xi are aligned with this plan. Demetri Kofinas @kofinas 6h When @balajis says he is "ideologically driven," he's not lying. He and his comrades have an explicit political agenda to replace the Dollar and bring about a new world order run by a plutocratic elite of free agents who remain removed from the obligations of citizenship & place.... twitter.com/balajis/status... Show more : 6) I am sadly not alone in this loss of faith in US banking. Moody's has downgraded the US banking system as a whole [7], many Indians have you recognize the distinction between rep been forced to move funds from collapsing US banks to India's GIFT d causing it! City banking system[8], and - in a development that should be worrying for the world - Chinese banks are soaring as Western banks are failing.[9] If the USD fails, the free world needs BTC as the reserve currency, not RMB. 5) To allay any question about my motivations, I publicly commit to never selling any Bitcoin for USD unless legally compelled to do so. While I still respect many individual Americans, I no longer have faith in the US currency or banking system. 7) Finally, after ten years of being in the public eye, with tens of u...with zero personal animus, I'm going to ord on something. And this is also address thousands of tweets, 50+ hours of podcasts, and hundreds of pages of ind to a lesser extent @SchreckReports, bcwriting things that require correction. there are enough people with context on me to know that I am a trader, I rarely price, and I do not do John McAfee-like stunts. I am an ideologically driven person who believes in Bitcoin & everyone who knows me can testify to this. 5:51 PM Mar 21, 2023 7,057 Views IN SUMMARY I did not propose the bet but only accepted it. I have absolutely zero profit motivation. perbitcoinization bet is a Simon-Erlich sty The hyperbitcoinization bet is a Simon-Erlich-style public interest bet. ettling an ideological matter. I did not prop ted it, I have absolutely zero profit motivat raised the alarm on printing as I did on COVID, because it's important. for USD unless legally compelled to do so, I am never selling Bitcoin for USD unless legally compelled to do so. until the US dollar is no longer the reserve And I am holding Bitcoin until the US dollar is no longer the reserve n unless legally compelled to do otherwise I'm already being proven right, as the printing is reportedly $18T. currency of the world, again unless legally compelled to do otherwise. I cannot give a more strongly worded statement. 43 Retweets 3 Quotes 79 Likes

Demetri Kofinas @kofinas When @balajis says he is "ideologically driven," he's not lying. He and his comrades have an explicit political agenda to replace the Dollar and bring about a new world order run by a plutocratic elite of free agents who remain removed from the obligations of citizenship & place. As ridiculous as this may sound to some people, it needs to be taken seriously and the deeper motivations and causes behind it need to be understood.

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Overview

Balaji Srinivasan's Bitcoin Bet is a wager made by cryptocurrency entrepreneur Balaji Srinivasan with Twitter user James Medlock in mid-March 2023 that sparked viral discourse online. Balaji bet Medlock that within 90 days of March 17th, 2023, one Bitcoin would be worth over $1 million because the dollar was about to enter hyperinflation due to a generalized financial crisis.

Background

On March 16th, 2023, Twitter^[9] user James Medlock (@jdcmedlock) tweeted a proposal of $1 million that the U.S. would not enter hyperinflation, receiving over 7,100 likes and 540 retweets in five days (seen below).

James Medlock @jdcmedlock : I'll bet anyone $1 million dollars that the US does not enter hyperinflation 10:31 PM Mar 16, 2023 7.1M Views 540 Retweets 161 Quotes 7,162 Likes

On March 17th, Balaji Srinivasan replied to Medlock's tweet and accepted the bet to bring attention to his warning about the world financial system. He believes that years of easy money policies, followed by the mass printing of digital money during the coronavirus pandemic and then the recent ramping-up of interest rates by the U.S. Federal Reserve, has put the banking system at risk for hyperinflation and total collapse. The tweet announcing the bet (seen below) earned over 12,000 likes and almost 12 million views in four days.^[1]

After Balaji accepted the bet from Medlock, he then doubled it to $2 million.

Balaji's Argument

In Balaji's view, banks are over-invested in U.S. Treasury bonds, which means they lose money when the Federal Reserve raises interest rates (that is, slows down the digital printing of money in order to slow down inflation). This was the initial problem with SVB, as the bank lost money on government bonds because interest rates went up and then didn't have enough to pay back depositors when a bank run happened.^[2]

Balaji believes that bank runs, such as those seen at SVB and Credit Suisse, will rapidly become more widespread, as more and more people withdraw their money from banks and see that these banks don't have enough in deposits to pay them back. Hyperinflation, in his view, will result from actions by the government to support these banks by giving them emergency loans of newly digitally printed money.^[3]

According to Balaji, if all this happens, he perceives the only safe asset will be Bitcoin because it is entirely outside of the financial system.

Balaji @balajis 15h The "safest asset in the world" was the riskiest asset in the world. Similar to the US banking system itself, which Moody's has downgraded. Bitcoin is the one global safe haven. Moody's warns of more pain for US banks as downgrades sector By Natalie Sherman & Dearbail Jordan & Faarea Masud BBC business reporters 14 March 2023 Peter Hebert @peterjhebert. Mar 19 Feels a bit like end of Usual Suspects when world awakens to fact that the extraordinarily dangerous bubble was not in fact Silicon Valley tech nor crypto...but instead low-interest government bonds 87 182 1,087 ₁274K

Counterarguments

Critics of Balaji have disagreed with certain points of his hypothesis. Some have argued the real danger is deflation: The banks are losing money on bonds because the government has raised interest rates and so is printing less money. Inflation is what happens when there is too much money.^[4]

Some argue Balaji is also overestimating the amount of money the banks have lost on treasury bonds and underestimating their ability to adapt and protect themselves and their depositors.^[5]

Others have pointed out that Balaji, and libertarian-adjacent crypto moguls like Peter Thiel, have a financial stake in cryptocurrency — and getting people to leave the dollar-based financial system and invest in Bitcoin will benefit them financially.

Some also argue that there are political reasons for making "Bitcoin the new gold," as Balaji says it will be. The world's reserve currency is the United States Dollar, and if that gets replaced by Bitcoin, the American government will be weaker. The ultimate goal would be to replace the modern nation-state with a different kind of governing entity entirely. Balaji has notably written a whole book about this idea.^[6]

Some, like Twitter user @davetroy (seen below) posted about Balaji's past ties with the Trump administration and libertarian ideology.^[10]

Some critics have gone so far as to accuse Balaji of wanting to trigger a bank run and worsen the financial crisis with his warning. Most of these critics, however, point out that the financial system is currently not in good health, and a series of external stressors (war, climate change, inflation and even artificial intelligence) are threats to banking.

$Ben Hunt @EpsilonTheory. Mar 19 Replying to @Epsilon Theory Bitcoin bros encouraging bank runs and a global economy shutdown is astonishingly evil and profoundly stupid, even for self-absorbed imbeciles who just discovered that, yes, fractional reserves means banks don't have enough cash to give everyone their deposits back immediately. 1,518 215.7K ↑ 212 260$

Developments

Bitcoin Value At Beginning

At the time of the bet, the value of Bitcoin was around $26,000.

Medlock Wins Bet

On May 2nd, 2023, James Medlock reported on Twitter that the bet had been settled. $500,00 dollars would be donated to a charity, while $500,000 would be taken by him personally (seen below). His post announcing this received almost 3,800 likes in two hours.^[11]

Balaji, however, did not admit defeat, posting a video and blog post doubling down on his theories about the US dollar and hyperinflation.^[12]

Online Reactions

As word of his bet began to spread in mid-March 2023, some seemed to follow Balaji and think he was correct, pledging to join him in switching their deposits from dollars to Bitcoin. Others, however, argued that Balaji was overhyping the troubles of the current financial system and trying to con people.

Many users on Twitter also posted memes making fun of finance people and crypto bros, using the news as an opportunity to take up the topic (examples shown below, left and right).