Why Balaji Srinivasan’s Twitter-Breaking Million-Dollar Bet Isn’t THAT Crazy
I mean, it is still pretty crazy
Almost exactly one year to the day after Terra Labs’ co-founder Do Kwon accepted a million-dollar bet on the price of LUNA, former Coinbase chief technology officer Balaji S. Srinivasan took a million-dollar challenge of his own. (Perhaps Balaji hadn’t heard it didn’t exactly go well for Do.)
If you’re thinking that this seems more like a stunt by some YOLOing YouTube crypto-bro, well, you’re not alone:
But Balaji is not that kind of dude. For instance, he has a book for sale, but you’d hardly know it from his tweetstorm:
In a blurb for the book, a16z co-founder Marc Andressen says “Balaji has the highest rate of output per minute of good new ideas of anybody I’ve ever met.” He is the opposite of everything crypto-bro like this douche:
So when Balaji steps out on a limb like this, whatever else you can say, it’s not because he hasn’t thought a long time about it.
But could 1 BTC really go to $1 million? And not by 2030 or 2025, but in 90 days? And the answer is . . . HELL YES.
From January to May 2021, Dogecoin went up a hundredfold:
At the time Balaji took the bet, Bitcoin was 26,420.67. To get to a million from there, BTC just has to go up 4.12% every day. That’s all.
And this year alone, the king crypto has posted ten daily green candles at least that tall, including four in the last two weeks.
Now, let’s not get ahead of ourselves, that’s still an incomprehensible growth rate. No, Balaji’s bet is something more than Bitcoin Go Up; it’s a bet against the U.S. dollar.
I, personally, have long held that we are ruled by fools, crooks and charlatans (at least in the U.S., though most nations in what was once called “the free world” aren’t much better). My argument is fairly simple and hinges mostly on presidential administrations and legislative branches of both colors having the fiscal discipline of a five-year old for about the last 50 years, with that five-year old being on a sugar high since 9/11 and on uncut cocaine since COVID.
Arthur Hayes has been on this hobbyhorse for some time, too, first calling for $1M BTC about a year ago and then doubling down last week. Both Hayes and Balaji have used this chart to show how regional banks are something something I don’t understand bond markets make my eyes sleepy.
But the secret sauce, and the essence of the bet, isn’t just that the U.S. dollar will fail, but that as the dollar fails, more and more people will flee to Bitcoin. If you thought retail buying was a thing in November 2021, multiply that by every American flocking to assets while a gallon of gas goes from $4 to $6 to $10 in a matter of days. (For reference, only 22% of Americans currently own crypto.)
Certainly gold and silver will benefit, and if we can learn anything from the initial COVID panic, toilet paper will be worth its weight in platinum. But Bitcoin weighs nothing, and you don’t have to bite it to prove it’s real.
And of course, Americans aren’t the only people who do business in dollars. As the once-respected hard currency folds, the entire world will recognize the wisdom of El Salvador’s president Nayib Bukele:
Liquidity will completely dry up, and when you’re bidding against the entire world for Bitcoin, it won’t be $26,000 anymore. Mining will once again be massively profitable (which it kind of hasn’t been lately).
Suddenly FOMO will mean more than just “oops I missed a 20% move” but something more like getting on the last plane out of Afghanistan.
Similar to how Mentos and Diet Coke combine to make rocket fuel, this confluence of phenomena will make a perfect storm of seven-figure Bitcoin.
It’s pretty easy when they work together. Again, some simple math:
So BTC will hit $1 million . . . eventually. But is it going to do all that in 90 days?
Okay, probably not.
But Balaji really wants to lose this bet. How do I know? Do the math:
Even if Balaji wins, he loses, because if he’s right, the $1 million that would buy 1 BTC in three months would have bought almost 38 at the time he made the bet.
Now, of course, he’s probably well-hedged on this bet with his personal BTC stash. He’s not stupid.
No, really, he’s not. Check the date on this one:
If he’s right, that’s terrifying.
But if he’s wrong? He’s still not crazy. YOU STILL DON’T OWN ENOUGH BITCOIN.
Full disclosure: I own BTC. I am not a financial advisor.
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