Former Coinbase CTO Balaji Srinivasan has withdrawn from his notorious $1 million Bitcoin bet, in which he gambled $1 million in USDC on the price of Bitcoin reaching $1 million.
However, the investor stands by his thesis that the US dollar is on the road to hyperinflation, stressing that the economy will not experience the “soft landing” promised by Federal Reserve chairman Jerome Powell.
Burning a Million Dollars
In a tweet on Tuesday, Balaji announced that he had mutually agreed to settle his uber-bullish Bitcoin price bet upfront. He provided on-chain evidence of three $500,000 payments, including one to Medlock (the counterparty of the bet), another to charity organization Give Directly, and another to Bitcoin Core development.
That’s 50% more than the former exec had to commit – and comes 46 days ahead of schedule. Speaking at Consensus 2023 last week, he had assigned a roughly 10% probability to his prediction of financial calamity actually coming true within that time.
“The reason I did this was because I do believe in the public good, but unfortunately we can’t rely on the public sector anymore to tell us when something’s wrong,” wrote Balaji. “So I spent my own money to send a provably costly signal that there’s something wrong with the economy.”
In an attached video, the investor explained that financial turmoil can happen fast – and without warning from regulators or the government. For example, Ben Bernanke said the economy might be in for a “mild recession” in April 2008, only five months before the great financial crisis officially began.
Likewise, it only took the Federal Reserve two days to inject $300 billion into the economy following Silicon Valley Bank’s collapse, and two weeks for $500 billion to flow out of commercial bank deposits into money market funds.
The Economy is Breaking
According to Balaji, multiple areas of the economy are already bordering on breaking. The US Debt ceiling is fast approaching, most US banks are now near insolvency, and the assets held by failed banks are now comparable to 2008 in value.
Furthermore, bonds suffered their worst year ever in 2022, which have been largely bought by banks and insurance companies. Student loan debt and credit card debt are also at all-time highs, amounting to $180 billion and $960 billion respectively.
Balaji also believes that countries are “de-dollarizing” at a rapid pace, echoing views published by BitMEX co-founder Arthur Hayes last month that the dollar could be on track to lose its status as the global reserve currency.
“If you believe there’s a high probability of these simultaneous economic crises causing a massive print in 90 days, 900 days, or even 90 months — then you expect some kind of default, and you expect fiat crisis,” wrote Balaji on his site. “And you’ll want to be prepared, whatever that means to you.”
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