The banking crisis sends up Bitcoin by 40% – and a venture capitalist bets one million dollar on its rapid victory. By Christoph Bergmann
Bitcoin, not Dollar, Bitcoin, not Ether, Bitcoin, not Monero: After the train of bank failures started rolling, the markets pounced on Bitcoin. Its price is up more than 40 percent in ten days, leaving the other cryptocurrencies far behind. But where will this lead? Venture capitalist Balaji Srinivasan predicts an unheard-of price rally in 90 days.
It almost happened – Credite Suisse, one of the world’s largest banks, was on the verge of bankruptcy, and the consequences for the Swiss, European and probably global financial system would have been difficult to gauge. So the Swiss government stepped in with guarantees totaling 9 billion francs. That didn’t really help until UBS, another major Swiss bank, bought Credite Suisse for about three billion francs. The acquisition is the largest bank merger in 15 years. Whether it will stabilize the troubled situation of the banks is still uncertain; so far, it has mainly sent UBS’s share price plummeting.
UBS was not the only interested party in Credite Suisse. An offer also came from Justin Sun, founder of Tron and known for his wealth, or rather his extroverted approach to it. He offered $1.5 billion at a time when UBS offered only $1 billion. He promised to integrate Credite Suisse into Web3, which probably was a much better plan than folding it into another stumbling big bank. But Justin Sun (small picture) was booted out and Credite Suisse is now a division of UBS, which will move up a notch in the league of the largest banks by total assets. The old game continues.
As in the U.S. before, the central banks’ interest rate policies have its consequences in Switzerland, too. The financial systems in the USA and in Europe had become accustomed to operating in an environment of very low interest rates. Now that interest rates have been raised around the world to fight inflation, this has torn gaping holes in the investment strategies of many banks. According to an ad hoc study published a week ago, 10 percent of all banks have incurred losses comparable to the ones by insolvent Silicon Valley Bank. 10 percent of all banks even have a worse capitalisation than SVB. Therefore, 186 banks in the U.S. are at the brink of bankruptcy.
These troubled prospects show that the current financial system does not have a truly stable foundation. This is the reason why Bitcoin was invented. In quiet times, when things are going smoothly in the financial system, the world likes to forget that and pretends that Bitcoin is just another speculative vehicle. But when fire breaks out in the glass towers of the big banks, and the sparks also reach the accounts of savers and companies, the world remembers Bitcoin again.
The signal the market sent over the last seven days was very clear: Bitcoin was rising. And rising. And rising. On March 10, the price was around 19,000 dollars. Then it climbed to over 24,000 dollars on March 13, 26,000 dollars on March 17, and over 28,000 dollars today, March 22. Bitcoin has gained more than 40 percent in less than two weeks – the steepest and strongest rise of this market phase, and from a chart perspective a clear trend reversal. Possibly the bear market is coming to an end.
What’s most striking is what’s happening with the other coins. Ethereum was up 11 percent, BNB up 12, Ripple up 4, Cardano up 2.5, Matic up 3, Dogecoin up 6, Polkadot up 10, Litecoin up 8, Monero up 5 in the same period: that’s all good, respectable gains in one week – but much less than Bitcoin. The market obviously does not want altcoins, it wants security and consistency. And it finds that in Bitcoin, not in other coins. This has rarely been so clearly visible. Accordingly, Bitcoin’s dominance index, its share of total market capitalisation, rose from about 41 to 46 percent.
But all this, some say, is just the beginning. Among those is Balaji Srinivasan, a U.S. venture capitalist who has invested in Bitcoin for years and is known for planning to put mining chips in every household appliance back in 2014. He recently made an absurdly bold-sounding bet: the pseudonymous twitter personality James Medlock said he would bet a million dollars any day that the U.S. would not enter hyperinflation. This was a joke, of course, since the million dollars Medlock would lose in the event of hyperinflation would be worth nothing.
However, Balaji accepted that bet, and he brought another asset into play: Bitcoin. Medlock would have to put in one Bitcoin, while Balaji bets one million dollars. If Bitcoin is worth less than a million in 90 days, Medlock gets it all; otherwise, the Bitcoin and the million go to Balaji. Medlock accepted the bet, and the dollars and Bitcoin will be held in escrow for 90 days. Shortly thereafter, Balaji put up another million to make the same bet with someone else.
This seems to be a stupid move. If Balaji believes that Bitcoin will be worth a million dollars in 90 days, he can now buy not one, but about 40 Bitcoins for a million dollars.
He obviously wants to send a signal with his bet. Balaji assumes that there will be hyperinflation, which from Bitcoin’s point of view is hyperbitcoinization: “That’s the moment when the world reorders values with Bitcoin as digital gold, returning to a model similar to the one before the 20th century.” he says. “What will happen is that first individuals, then corporations, then large funds will buy Bitcoin.”
Then he predicts that countries like El Salvador and other crypto-friendly developing nations will buy even more Bitcoin. But the big moves will happen “when a U.S. state like Florida or Texas or countries like Estonia, Singapore, Saudi Arabia, Hungary, or the United Arab Emirates buy Bitcoin. And if Narendra Modi mandates India’s central bank to buy Bitcoin, even if only as a hedge, it’s over.”
But why is it happening so fast, why in only 90 days? “Hyperinflation happens quickly.” Balaji claims. “Everything will happen very quickly once people understand what I’m saying and realize that the Federal Reserve has been lying about how much money the banks have. All the dollar holders will be wiped out.” The digital devaluation of the dollar “will come, and it will be intense.”
Will hyperbitcoinization really happen so soon? Anyone up for a bet?
Christoph Bergmann is the editor of Bitcoinblog.de, Germany’s leading publication on cryptocurrencies. This article has been published there first in German. Translation and editing: Aaron Koenig