Balaji Srinivasan, former CTO of Coinbase, grabbed a lot of attention last week with his bet that Bitcoin will reach $1 million within the next 90 days, and also received a lot of criticism for his “unrealistic” prediction. Saifedean Ammous, one of the biggest Bitcoin bulls and author of the most successful book on the leading cryptocurrency, “The Bitcoin Standard,” has now shared his opinion as well.
Why Hyperinflation Is Unlikely In The US
Srinivasan’s bet was in response to financial expert James Medlock, who placed a $1 million bet that the United States would not enter hyperinflation despite the recent collapse of banks in the country.
In a Twitter thread on March 17, Balaji stated that the current banking situation is similar to the 2008 financial crisis, but this time central bankers, banks and regulators lied to everyone. According to Srinivasan, banks saw the crash coming but were given permission by regulators to hide their literal insolvency. Hyperinflation is therefore inevitable, he concludes.
According to Saifedean Ammous, however, the realities make this unlikely. “I feel dirty sounding bearish on Bitcoin, but I do not think Bitcoin will hit $1 million in 90 days & and I do not think the dollar can possibly hyperinflate this quickly,” the author wrote today.
The reason, according to the proponent of the Austrian school of economics, is that a banking crisis is deflationary, even if Srinivasan is right about the extent of the banking crisis. If one bank goes bankrupt, the money supply is reduced. If all banks go bankrupt, then much of the money supply is destroyed, which would make hyperinflation less likely.
In addition, Ammous argues that while central banks will respond by printing money, which can lead to price inflation, a hyperinflation is highly unlikely in such a short period of time. Even if the U.S. central bank were to bail out every single bank depositor, it would only keep the money supply constant, the economist explained and said:
Yes, they will likely print more than that to finance increased spending for political purposes, but you’d need an impossibly large amount of printing to bring about hyperinflation in 3 months & history provides plenty of evidence in support of that.
Bitcoin Will Slowly Rise, As Will Inflation
Ammous also refutes Srinivasan’s examples of hyperinflation, which purport to show that inflation can accelerate rapidity in just 90 days. According to the economist, all hyperinflations came at the end of a prolonged period of inflation.
“Even in highly dysfunctional countries with decrepit monetary & financial institutions & no global reserve currency, it takes many months and maybe even years to arrive at the point where the value of a currency drops by half in a day, which is the sort of hyperinflation needed to get to $1m / Bitcoin in 3 months,” the author said.
Likewise, Ammous calls the example of Lebanon inapplicable, as the Lebanese lira devalued overnight after years of slowly rising inflation, “and that is what gives his chart such a huge sudden spike.”
Even in a country which was massively corrupt and indebted, did not have the global reserve currency, and printed money on a scale “hard to imagine” in the United States, it took years. According to Ammous, hyperinflation in the US in three months is therefore as good as impossible, and with it a Bitcoin price of $1 million.
At press time, the Bitcoin price was at $28,073; traders seemed to be cautious in light of the U.S. Federal Reserve’s interest rate decision coming up today and the new projections (dot plot).
Featured image from iStock, chart from TradingView.com