How realistic is former Coinbase CTO’s $2 million Bitcoin bet on US hyperinflation?
Coinbase’s former CTO Balaji Srinivasan on Friday bet that the price of Bitcoin will benefit from a rapid devaluation of the US dollar over the next three months, skyrocketing to $1 million by June 17.
Srinivasan participated in a two-individual bet on the same day, putting up $1 million with pseudonymous Twitter expert James Medlock and another unnamed individual. If Bitcoin fails to mark what would be historic gains, the two will each receive $1 million in Circle’s USDC stablecoin.
The bet is part of Srinivasan’s view that the global economy is teetering on the edge of rapid change, which he called “hyperbitcoinization.” He predicts that the US dollar will enter a point of rapid hyperinflation and the global economy “redominates on Bitcoin as digital gold.”
In this scenario, the market capitalization of Bitcoin — already the largest token — would increase to about $19.3 trillion from about $549 billion today, according to CoinGecko. In comparison, the value of the US stock market was in excess of 40.5 trillion dollars at the end of last year, according to Siblis Research.
Srinivasan’s prediction comes amid a series of bank crashes in the US that have injected fear and uncertainty into financial markets. And although Bitcoin’s correlation to stock indices such as the S&P 500 and Nasdaq remains significantsome on Twitter are calling it “The Great Decoupling” given Bitcoin’s recent surge above $28,000 as Wall Street falters.
The bold effort inspired lengthy Twitter threads from some of crypto-Twitter’s most prominent voices, including Bitcoin entrepreneur and educator Jimmy Song and venture capitalist Adam Cochran, who delved into just how realistic the prediction could be.
Referring to the performance of cryptocurrencies during the outbreak of the coronavirus pandemic in 2020, Cochran said that Bitcoin would need a catalyst more extreme than that to surpass the 547% rise seen from 2020 to 2022.
Cochran argued that a collapse of the US and European banking systems would eventually overshadow the potential value of Bitcoin as an asset, making bunkers or beans a better use of money than buying the world’s largest cryptocurrency.
“Simply put, stores of value or alternative assets do well when we doubt the profitability of an economic system and not the existence of a system,” he said Decrypt via Twitter DM. “If the system does not exist, we move down the hierarchy of needs, and value necessities, not valuables.”
Cochran said Srinivasan’s efforts are a sign of hope in the crypto market after the industry faced a rough patch when the crypto winter began last year, a time when prices fell and many crypto firms collapsed. He noted that the digital asset industry lost much of the excitement and hope that brought people into it.
“They’re hungry to get it back,” he said. “It’s just disappointing to see it driven by an unrealistic bet in such a risky macro environment.”
Other voices, such as Song, seemed supportive of ideas echoing Srinivasan’s efforts, arguing that Bitcoin could have some utility during an existential crisis for the financial system as it is known today.
“Bitcoin will play a critical role in mitigating some of the catastrophic effects,” he said. “As a strictly limited currency, Bitcoin offers a much better store of value, which mitigates the impact of hyperinflation.”
BloombergMatt Levine joined in on Saturday to ask what could be considered a simple question: If Srinivasan thinks Bitcoin will hit $1 million in 90 days, why would he use the money to bet on it as opposed to just buying Bitcoin?
Levine said in a subsequent tweet that Srinivasan’s move could be an attempt to “manipulate the price [of Bitcoin] up” based on the responses he received. Others expressed the idea that Srinivasan might have made the effort as a way to bring exposure to himself and Bitcoin.
Srinivasan’s net worth is estimated to be around $150 million, according to The data wallet. He had joined Coinbase after a company he co-founded called Earn.com – which rewarded users with digital assets for completing small tasks – was bought by Coinbase.
Srinivasan worked at Coinbase for about 14 months before leaving the exchange in May 2019. Among the accomplishments listed on his LinkedIn profilehe was responsible for organizing the “business and technical sides” of Circle’s USDC stablecoin launch.
Srinivasan is not the only person out there who has envisioned a price of $1 million per Bitcoin. Last January, Cathie Woods ARK Invest Assumed that Bitcoin could exceed $1 million by 2030, and said the network “is likely to scale as nation states adopt [Bitcoin] as legal tender.”
