This bet was in reaction to financial expert James Medlock who put forward a $1m bet that the US would not enter hyperinflation in spite of the recent collapse of banks in the country

Balaji Srinivasan, a former Chief Technology Officer (CTO) of Coinbase, has placed a $2m bet that Bitcoin would reach the $1m price level in three months. This bet was in reaction to financial expert James Medlock who put forward a $1m bet that the US would not enter hyperinflation in spite of the recent collapse of banks in the country.

In a Twitter thread on March 17, Balaji detailed his opinions and why he was offering the bet. Balaji argues that the latest banking situation is like the financial crisis of 2008, but now, central bankers, banks, and regulators have lied to dollar holders and depositors. As per the investor, the banking crisis was beyond fractional reserves as banks don’t have sufficient funds on a market-to-market basis to cover withdrawals.

Balaji also alleges that banks saw the crash coming but were permitted by regulators to conceal their literal insolvency till it became a big issue. Citing the woes of former FTX chief executive Sam Bankman-Fried, Balaji further said that banks deployed a similar system of using customer deposits to invest in questionable bonds.

They all used the deposits to buy the ultimate shitcoin: long-dated US Treasuries. And they all got rekt (wrecked) at the same time, in the same way, as they purchased the same asset from the same vendor who devalued it at the same time: the Fed, he said.

But that is not all. Balaji claims that the current banking crisis will lead to what he calls ‘hyperbitcoinization,’ a phenomenon where the world redenominates Bitcoin as digital gold, like the model used prior to the 20th century with physical gold. He further said that individuals, companies, and big funds such as sovereign countries will purchase Bitcoin to hedge against hyperinflation in the coming weeks.

Painting a grim scenario, he believes that hyperinflation will happen quickly once dollar holders realize that the Fed has lied about how much money is in the banks. Citing a chart of the long-term devaluation of USD/BTC, the analyst believes a considerable drop-off will take place in the coming weeks.

Balaji winds up by stating he will be moving $2m into USD Coin for the bet. This will be split into $1m bet with Medlock and $1m with another person. Terms of the bet: ideally, someone can set up a smart contract where BTC is worth >$1M in 90 days, then I win. If it is worth less than $1M in 90 days, then the counterparty gets the $1M in USD, he proposed.