This $2 Million Bitcoin Bet Is Not as Stupid as It Sounds

The Four Assets You Need to Own Today.

At the moment, there’s lots of chatter in the Twitter-sphere and the media about bitcoin hitting $1 million per token.

In mid-March, for instance, Balaji Srinivasan—former chief technology officer at Coinbase and a partner at venture capital firm Andreessen Horowitz—made a wager that hyperinflation is coming to America in 90 days and that, as a result, bitcoin will hit the seven-figure mark in June.

Under the terms of the bet, Srinivasan offered to place $2 million in an escrow account and exchange $1 million for one bitcoin within 90 days, in mid-June. Two people accepted the bet.

Now, I’m a strong advocate of bitcoin. I think it’s possible that bitcoin will hit six and potentially even seven figures one day.

But if that happened by June… holy jumpin’ Jehosephat!

The global economy would have to be in meltdown… the dollar would be collapsing… inflation would be off the charts… and the bank failures we’ve seen this month would be but an amuse-bouche for a cornucopia of bank collapses all over the world.

Basically, Great Depression II, in which the original version was but a light-hearted dress rehearsal.

Of course, that’s not going to happen.

Srinivasan will lose this bet.

But I’m telling you about it because predictions like his are based on very real and justifiable worries about the financial system today.

Way back in early 2021, I began writing that the Federal Reserve was on the wrong path.

First, I noted that the Fed’s idea that inflation was “transitory,” that it would subside as soon as the pandemic faded, was 100% wrong on its face. Decades of vast borrowing by Western governments, mixed with trillions of new stimulus dollars to save shuttered economies during the pandemic, guaranteed that inflation was going to be a much bigger beast than some transitory gnat.

Then, when it was clear that inflation was not transitory, the Fed started raising interest rates like a punch-drunk boxer trapped in the corner… swinging wildly at anything, hoping to land a decisive blow.

That, too, was a mistake, as I noted many times.

Raising rates as aggressively and as quickly as the Fed has raised them was always going to lead us to a cliff.

The problem is that the Fed has only faced “real” inflation once in the last 70 years or so.

So, when persistent inflation surprised the Fed, Chair Jerome Powell reflexively reverted to an old playbook… a strategy from the late ’70s, in which the Fed of the day pushed interest rates to nearly 20% in order to quash mid-teens inflation fueled primarily by domestic monetary policies.

But post-pandemic inflation is a much different creature.

Yes, boneheaded domestic monetary policies have played a role this time around, but there are also other culprits, most notably post-pandemic supply chain issues tied to the open-again/closed-again economic policies in China (the world’s factory floor), war in Eastern Europe, and Mother Nature denying rain to crops all over the planet.

The Fed simply has no capacity to influence any of that with rate hikes. Thus, by raising rates so aggressively, the Fed misplayed the moment.

The America of today is radically different than America of the 1970s.

Debt was nothing back then.

Debt is everything today.

The U.S. government, businesses, and consumers are all more indebted than at any point in history.

In that environment, driving up rates to 5% from 0.25% in basically a year was always a disaster waiting to happen.

And the disaster is now apparent: Three U.S. banks failed this month, as did one of Europe’s elite banks, Switzerland’s Credit Suisse. Meanwhile, a report has found that nearly 200 other U.S. banks are at risk of Silicon Valley Bank-style collapses.

Probably don’t need to say that’s not a good sign.

But this is what happens when decades of Fed mismanagement run headlong into an unexpected pandemic that upended the global economy.

Now, we have entrenched inflation… and a banking industry leaning into an abyss.

In short, we’re in a fraught position these days.

If ever there was a time to own protection, now’s the time. I sound like a CD-player that’s skipping, but gold, silver, Swiss francs, and bitcoin are going to be your friends in the world that we now know.

Bitcoin may not hit $1 million by mid-June. In fact, it definitely won’t. But I won’t be surprised when it’s trading in the high six- or even seven-figures by the end of the decade.