Bitcoin, not Dollar, Bitcoin, not Ether, Bitcoin, not Monero: After the train of bank failures began to roll, the market rushed to Bitcoin. The price increases by almost 30 percent in one week – and leaves the other cryptocurrencies far behind. A well-known US venture capitalist predicts fantastic prices in 90 days as the banking crisis may force the US Federal Reserve to reverse interest rates.
It almost happened. Credite Suisse, one of the largest banks in the world, was on the brink of bankruptcy and the consequences for Swiss, European and probably global finance would have been difficult to predict. The Swiss government therefore stepped in with guarantees totaling 9 billion francs, but that didn’t really help until finally UBS, also a major Swiss bank, bought Credite Suisse for around 3 billion francs. The takeover is the largest banking merger in 15 years. It is still uncertain whether it will stabilize the uneasy situation of the banks; so far it has mainly sent the UBS share price plummeting.
UBS wasn’t the only interested party in Credite Suisse. An offer also came from Justin Sun, founder of Tron and known for his wealth and extroverted use of it. He bid $1.5 billion at a time when UBS was only bidding $1 billion. He promised to integrate Credite Suisse into Web3, which, frankly, was a far better plan than merging it with another struggling big bank. But Justin Sun has been booted out, and Credite Suisse is now a division of UBS, which should climb a notch higher in the league of the largest banks by total assets. The old game goes on.
As previously in the USA, the consequences of the interest rate policy of the central banks are making themselves felt in Switzerland. The financial system in the US – and also in the EU – had become accustomed to operating in an environment of low interest rates. Now that interest rates have been raised around the world to combat inflation, this has torn gaping holes in the investment strategies of large banks. According to an ad hoc study published a week ago, 10 percent of all banks have made losses comparable to those of the insolvent Silicon Valley Bank, and 10 percent of all banks are even worse capitalized than them. Therefore, 186 banks in the US are at risk of meeting the same fate as the SVB.
This turbulent outlook makes it clear once again that the financial system as we know it does not have a truly stable basis. They illustrate why Bitcoin was invented and why Bitcoin is such an important alternative. In quiet times when the financial system is in good shape, the world tends to forget this and pretend that Bitcoin is just another vehicle for speculation. But when the fire breaks out in the glass towers of the big banks and the sparks reach the accounts of savers and companies, the world remembers it again. She remembers Bitcoin again.
The signal that the market was sending over the past seven days was hard to beat in terms of clarity: Bitcoin was rising. And rose. And rose. On March 10, the price was just under 19,500 dollars. Then it climbed to almost 22,000 dollars on March 13, a good 27,000 dollars on March 17, and 28,000 dollars today, March 21. Bitcoin has gained almost 30 percent within a week – the steepest and strongest rise of this market phase, a clear trend reversal from a chart point of view. This may be the end of the bear market.
What is most striking, however, is what is happening away from Bitcoin – namely much less. Ethereum is up 11 percent over the same period, BNB is up 12 percent, Ripple is up 4 percent, Cardano is up 2.5 percent, Matic is up 3 percent, Dogecoin is up 6 percent, Polkadot is up 10 percent, Litecoin is up 8 percent, Monero is up 5 percent, Bitcoin Cash is up 12 percent: all good, respectable gains in a week – but massive losses compared to bitcoin. The market doesn’t want altcoins, it wants security and consistency. And he finds that in Bitcoin, not in other coins. This has rarely been so visible, and accordingly Bitcoin’s dominance index, its share of the total market capitalization, increases from about 41 to a good 46 percent.
But all of this, some say, is just the beginning. Among those few is Balaji Srinivasan, a US venture capitalist who has been investing in Bitcoin for years and is known for wanting to put mining chips in every home appliance as far back as 2014. He then made an absurdly bold-sounding bet: a James Medlock said he’d bet a million dollars anytime that the US wouldn’t go into hyperinflation. This was a joke, of course, since the million dollars Medlock would lose in the event of hyperinflation would no longer be worth anything.
But Balaji struck:
I will take that bet.
You buy 1 BTC.
I will send $1M USD.
This is ~40:1 odds as 1 BTC is worth ~$26k.
The term is 90 days.
All we need is a mutually agreed custodian who will still be there to settle this in the event of digital dollar devaluation.
If someone knows how to do this… https://t.co/tcuBNd679T pic.twitter.com/6Aav9KeJpe
— Balaji (@balajis) March 17, 2023
I accept this bet, so the investor. But he brought another asset into play – Bitcoin. Medlock had to deposit one bitcoin, Balaji 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 that the dollars and bitcoin would be held in escrow for 90 days. Shortly thereafter, Balaji added another million to make the same bet with someone else.
The bet is obviously stupid. If Balaji believes that bitcoin will be worth $1 million in 90 days, he can now buy not just one bitcoin for $1 million, but around 40 bitcoins. Apparently he wants to send a signal. He explains his argument:
Just as in 2008, the bankers lied.
This time, the central bankers, the banks, and the bank regulators have lied to all dollar holders and depositors.
— Balaji (@balajis) March 17, 2023
He assumes that there will be hyperinflation, which from Bitcoin’s point of view is hyperbitcoinization: “This is the moment when the world reorders values with Bitcoin as digital gold and thus returns to a model that was before the 20th century resembles. What will happen is that first individuals, then corporations, then large funds will buy bitcoin. Then sovereigns like El Salvador or tiny crypto-friendly countries.” But the big moves will happen “when a US state like Florida or Texas or ‘normal’ 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, if only as a hedge, it’s over.”
But why is it happening so quickly, why only 90 days? “Well, hyperinflation happens fast…it’s all going to happen very quickly once people understand what I’m saying and realize the Federal Reserve lied about how much money the banks have. All dollar holders will be destroyed.” The digital devaluation of the dollar “is going to come, and it’s going to be intense.”
To be honest, we never thought that it would really happen that quickly, Only 2 weeks ago we were expecting rite hikes and more QT, and now we have gone in a banking crisis with the money printer restarting and the market expecting rate cuts.
So things are movig fast and the odds for the hyperbitcoinization scenario have never been so high.