Call it “the Big Long.” What started as a clever Twitter joke about hyperinflation has now turned into a high-stakes bet and politically charged spectacle about the future of money. On Thursday, as Western banking systems hovered somewhere between “turmoil” and “crisis,” James Medlock, a pseudonymous, left-leaning economics influencer, tweeted “I'll bet anyone $1 million dollars that the US does not enter hyperinflation.” The joke is that it’s a can’t-lose bet, because in the unlikely event that hyperinflation occurs and Medlock loses, then $1 million would only buy, say, a loaf of bread. Enter Balaji Srinivasan, Silicon Valley entrepreneur and establishment gadfly, who, on Friday, actually took Medlock up on the bet. With a catch. Srinivasan offered to bet Medlock that 1 Bitcoin, which is currently worth less than $30,000, will be worth more than $1 million in 90 days. That was his own way of hedging the bet: Srinivisan puts up one million U.S. dollars, and Medlock puts up one Bitcoin. If one Bitcoin is worth more than a million dollars in three months, Srinivasan will get to take Medlock’s Bitcoin. If the price remains below $1 million, Medlock will get to take Srinivasan’s million bucks. According to the men, after some weekend back-and-forth, they’re moving forward with the bet. Medlock told DFD this afternoon that a contract has been written up and that he and Srinivasan have agreed on a third party, whom he declined to name, to hold the money in escrow. After their chosen agent consults with a lawyer, Medlock said they will sign the contract and move the money to escrow. “This should happen today,” he said. What’s going on here? There are a couple of ways to look at this. One is that Bitcoin is finally earning its stripes as a hedge against a catastrophic collapse of the conventional financial system. It has been up roughly 40 percent since the Silicon Valley Bank failure triggered widespread anxiety about traditional banks—and Srinavasan touts it as a safe haven in a crisis. The other view, as some have speculated, is that Srinavasan has his own angle here and Bitcoin is a market that individuals can manipulate through the generation of social media hype. If you're interested in the long-term future of money, though, there's also a third: That Srinivasan is willing to lose a fair bit of money in order to reframe the public conversation about it. Srinivasan is part of a clique of wealthy, libertarian-leaning tech investors who’ve become increasingly vocal in their critiques of Washington, which they paint as hopelessly obsolete in the face of new internet technologies like cryptocurrencies. This worldview has been complicated over the past couple weeks as Silicon Valley Bank failed, forcing its many tech-world clients to call on Washington for help, which came in the form of a depositor bailout. Despite this helping hand, Srinivasan has seized on the ensuing turmoil in the banking world to escalate his rhetorical assault on the establishment, describing his predicted dollar crash as a comeuppance for “woke white” Democrats. As financial commentators were quick to point out, if Srinivasan really thinks Bitcoin is poised for a historic run-up in value, he could use his million dollars to buy a few dozen of them, rather than winning just one. Another possibility is that Srinivasan, a long time crypto booster and former chief technology officer at Coinbase, holds enough Bitcoin that if his bet causes a mild run-up in prices, his gains will cover whatever he loses on the bet. For context, Elon Musk, whose Twitter following is about 150 times the size of Srinivasan’s, can move Bitcoin’s price by as much as 17 percent with his tweets, according to one study published in January in the journal Technological Forecasting and Social Change, whose authors nonetheless confusingly concluded, “we discover that on average, price effects are only significant for Dogecoin-related Tweets but not for Bitcoin.” Bloomberg’s Matt Levine suggests the stunt could be an attempt to manipulate the price of Bitcoin and could warrant scrutiny from the Commodities Futures Trading Commission. In response to a request for comment from DFD, Srinivasan cited several recent tweets in which he pushes back on such critiques and describes his motivation as “getting innocents to Bitcoin lifeboats.” Srinivasan’s stunt is reminiscent of the “compensated dollar” campaign spearheaded by the wealthy American economist Irving Fisher a century ago. In the 1920s, Fisher, concerned about the strength of the dollar, sold pricing data to newspapers that was framed in a way that inverted people’s way of thinking about the cost of living. Fisher framed his data as a “purchasing power of money” index, rather than a “price index,” calling attention to the fluctuating value of a dollar, according to journalist Jacob Goldstein’s book, “Money: The True Story of a Made-Up Thing.” Fisher also published books, testified at government hearings, lobbied influential thinkers and spent liberally in order to promote his view. Goldstein credits Fisher’s years-long campaign with helping to usher in a sea change in economic thought that eventually led the U.S. to abandon the gold standard in favor of a system that sought price stability. Fisher’s reframing of price data for newspapers amounted to a PR coup for his worldview. At a time of distress in the financial system, Srinivasan’s wager invites the public to go down the crypto rabbithole with him and invert their perceptions of which monetary systems are “safe and reliable” and which are “dangerously unstable.” In fact, Bitcoin boosters have long encouraged a Fisher-esque reframing by discussing prices in “Sats,” short for Satoshis, a unit equivalent to one one-hundred-millionth of a Bitcoin. Evidently, Srinivasan has decided the time is right to blow people’s minds. In his favor as a prognosticator is a January 2020 tweet that anticipated Covid’s social impact and effect on trends like remote work and mask-wearing. Against Srinivasan is centuries of recorded financial history, which has yet to see a global reserve currency shift from mild inflation to hyperinflation in the time between an equinox and a solstice. Is the world poised to adopt crypto en masse? It’s worth noting that Srinivasan initially suggested the bet be made on-chain using stablecoins and a smart contract, before he and Medlock settled on old-fashioned escrow. If Srinivasan loses, Medlock is taking the opportunity to make a political point of his own. “As someone who believes the top marginal tax rate should be 70%, I'll be making sure that, between taxes and a donation to GiveDirectly, I see an effective tax rate of 70% of the million,” he told me. “Once I win.”
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