Balaji's Prediction: Bitcoin Is Going From $26k To $1M in 90 Days (#434 Pt.1)

So Balaji comes out, he says, I will take that bet. You buy one Bitcoin and I'll, I'll send $1 million to an escrow. To be clear, this is 40 to 1 odds. So he is basically saying, not only is this unlikely to happen, like if this was even odds, it would've been like, dang, Balaji's gonna lose a million dollars cuz Bitcoin's not likely to be worth a million dollars. Then he added in 90 days, which is already a radical move. Then he said, I'm— and by the way, the million dollars versus one Bitcoin. Bitcoin's currently at $26,000 at this— at the time you made this bet. He goes, that's 40 to 1 odds that I'm laying you. All right, we got an episode here with Pomp, Anthony Pompliano, who you may know as the Bitcoin Guy. He's huge all over YouTube, Twitter, everywhere else. He, uh, came on. We're actually gonna do this as a two-part episode because at the beginning It was all business. We were business in the front. We were talking about this crazy million-dollar Balaji bet where he's betting that Bitcoin is going to $1 million in the next 90 days. We talk about that, why Balaji thinks it, what we think about the bet. And Pomp does a, you know, I don't know, Econ 101 where he explains what's going on with the banking system from his perspective. That was good.

And here's the thing though, in that episode, the whole episode is about something that's going to happen inside the next 90 days. So if you're going to like It is a little fearful listening to it. And so actually listen to the whole thing because, and do it now because we're talking about something that's happening in 90 days. And then go ahead. The second episode was way more fun and it was pretty wild. Go ahead.

We talk about his business empire, you know, what he's building and why he's building it that way, why he gave back all the money from his fund and shut that down, why he—

it's huge—

turned off all his advertisers, millions of dollars of advertisers, what he's doing instead. So we talked about that and then we talked about, then it went off the wall and, uh, the, the pod got a little crazy, but in a great way. I think people are gonna, you're gonna love part 2.

He broke down like all of his businesses and how they work. It's very impressive. It was pretty wild. Um, and, uh, it was, it was, he's, he's impressive. He's significantly more impressive than a lot of people think, I think, because there's way more behind the scenes.

Pretty funny stories, which Pomp is usually, he's pretty buttoned up on his, on his main channel cuz he's talking finance, he's talking serious, but he tells some pretty funny stories. So the second, uh, part 2 is the more fun episode. Part 1 is the more serious episode. I think you'll like 'em both.

And we have to remind you guys that our episodes, we work really, really hard. And unlike every other type of podcast out there, our stuff's not free, but you don't pay with money. All you have to do is go to our YouTube page. We call this the gentleman's agreement. What is it? The ladies' understanding.

The ladies' understanding.

You go to our YouTube page. And the reason it's called that is because it's an understanding. It's an agreement. We can't be there behind your screen to check this. Otherwise we would. But everyone's doing it. So just go ahead and do it and click subscribe on YouTube and then just go ahead and do that on Spotify and iTunes because the more you do that, the more our volume goes up and we get more downloads and we could do, keep doing this type of stuff. Pomp ain't gonna come on to episodes like this if, if we don't have a big listenership. Same with all the other guests.

All right, enjoy.

Um, Pomp, we're live by the way. We, we always just jump right into this thing. No small talk.

Let's go. What do you guys want to talk about?

Dude, you're— I'm so glad you're here. You are, you are the Ryan Seacrest of the, of the industry. You are the hardest working man in content entertainment. I'm so glad you're not doing your like 5:00 AM show anymore. Um, I'm sure you're also pretty glad you're not doing that every morning. How does it feel to get some sleep?

I've always slept, uh, pretty well, but The content stuff is, um, it's the best way in the world to learn. You put information, ideas out there, and the people who agree or have like things to add, they're super constructive and they respond to emails, they tweet at you, they do all that stuff. And then the people who vehemently disagree, they make their voice heard, you know, very well. And so you like quickly figure out like good ideas, bad ideas, and then you also get all these like rabbit holes to go down. And I think that probably the reason why, you know, you two, myself, and many of the other people that we all know and spend a lot of time talking to We enjoy it. Like the internet is this amazing thing that we all get to use on a daily basis. And so, uh, creating content, I found it's just this great way to, uh, to elicit like-minded people and, uh, and to learn.

So I was, uh, uh, Pump, I, we have a lot to talk about and we'll do like a proper intro in a second, but I was talking to my friend Jason Yanowitz, who you guys used to work together. He worked for you. Now he has his own company and Jason works pretty hard. He told me that you were the hardest working person.

Jason Yanowitz used to work for you?

Uh, he, he, uh, him and his partner Mikey Polito, they were, uh, the two guys who helped me start the podcast initially. They, uh, they tricked me. They literally came to me and they were like, uh, hey, you should have a podcast. And I was like, what's a podcast? And they were like, you know, like all these other examples. And then I was like, uh, I don't know how to do that. They're like, well, we do. And little did I know they had no clue what they were doing. They instead convinced me to do a podcast and then they DM'd, I'm pretty sure Gary Vaynerchuk's like podcast guy and was like, hey, we're going to start a podcast. Like what equipment do we need? It's like, kudos to those guys. That was pretty smart hustle.

And now they have a media company that does tens of millions of dollars, whatever. It worked out. And Jason works pretty hard. Um, Jason told me that you're the hardest working person he's ever been with. He said that they used to work at your office 7 days a week and that you just were nonstop. But then when I went out to dinner with you recently, you told me your schedule. It didn't sound very hard. It sounded just normal. So which is it? Which is true?

Uh, I think it's probably both. So one of the things, uh, I always use as a framework is Uh, there's kind of gas and brakes in life. And so at certain points you need to hit the gas and other times you can kind of like let your foot off the gas, coast as the car, and then other times you need to hit the brake and knowing when to hit the gas, when to hit the brake, uh, is pretty important actually. You don't want to kind of be hitting the gas when there's a wall in front of you. Like you want to make sure that you, uh, are able to kind of go all in when, uh, when it's necessary. But the second thing is you got to last, right? You can't just sprint all the time. No matter how athletic you are, you got to have some level of endurance. And so that's probably one of the things that I've really, uh, uh, learned to do over the years. Uh, I wasn't great at it at the beginning. Now I'm probably pretty good at it, but you know, we're recording this on Monday. Yesterday was Sunday. I record a podcast Sunday morning at, you know, 11 o'clock in the morning after I did a 2-hour meeting with a friend at 9:00 AM. And a lot of people are like, that sounds crazy. But I'm like, no, what did you do? You like went and did all your hobbies. I have no hobbies. I literally hang out with my family and I work, but I do it because I enjoy it. And so if you enjoy doing it, like this isn't, hard. I'm like looking forward to today talking to you two because I'm like, you know what? They're probably going to be ridiculous. Probably gonna have a lot of fun and we're gonna learn something from each other. Like how lucky are the three of us?

Two out of three ain't bad. So let's, uh, we got to get to this crazy biology bet and then I'm going to ask you what you're doing with your life after that. Cause I think you got an interesting little empire.

You have to set the stage for who he is, right?

Uh, who Pomp is.

Okay.

So let's start with who Pomp is. So, uh, I think you're known as like the Bitcoin guy, I would say. That's the, that's kind of how you built your brand. You've obviously done a lot more than that before that. I think you worked at Facebook and even Snapchat for a little quick lunch. And, uh, and, and so you worked in tech, you, uh, started to build a big following on Twitter, uh, around crypto and Bitcoin, uh, built one of the bigger like newsletters and brands in that space. And since then launched a bunch of like, you know, uh, businesses around it. So you had a, you had a VC, you sort of had your own, you know, VC fund or you worked at a VC fund, then launch your own. You, uh, have like a kind of like a crypto jobs company. You have a bunch of things in that ecosystem since then. I think you've, you've, you've made some changes now. So, so I want to hear about those in a, in a bit. But then we have this biology bet and, uh, Pomp, why don't you just give us the quick 60 seconds on who biology is and then we'll, we'll frame what this, what this crazy bet is. And then I have some inside info also.

All right. So I don't want to be a spokesperson for Balaji. So everything I say is my opinion. This is my description of him. This is my description of the bet. But Balaji Srinivasan is probably best known now for being one of the more kind of public figures to have predicted a lot of what happened for COVID. He was very early calling out, hey, this is a risk. If this risk becomes a reality, here's how bad it could get. And, you know, again, as with predictions, a lot of it was right, some of it was wrong. But generally, I think people point back and they're like, man, we should to listen to that guy. He then went on like a 2 or 3 year heater where he kept making predictions and kept being right about a lot of things. And so the internet kind of, uh, rallied around this idea of like the worst words to ever hear was Balaji was right. And so when you build that type of, uh, kind of following and that type of, uh, reputation, now people put a lot of weight when you say something. And so his latest thing is Bitcoin is going to hit $1 million in the next 90 days, which sounds absolutely insane. Bitcoin's trading at $27,000. It's like, you know, whatever, 40x from here. And to do it in 90 days, like, we've never seen an asset really ever do that before. Now, I don't agree that that is highly likely. I would put it at like maybe, I don't know, 5% chance, which is actually much higher than probably most people would put it. Uh, but to me, the most interesting part is like the reasoning behind why he's saying this. And you know, I think it's important to call out the Balaji's bet is like the best meme of 2023. He was able to essentially create a meme that has caused millions of people to now talk about this idea of hyperinflation, bank failures, and Bitcoin. And I think that's ultimately what he was trying to do. So if you asked him in a private room like, hey, do you really think Bitcoin's going to be $1 million in 90 days? He's putting $2 million on the line. So like, he definitely thinks there's a chance. But I don't know if he's at like 99.999% likely or if he's trying to call attention.

What's $2 million to him? Is that a big deal or no?

It's hard to tell. So Balaji, before he became known as the like, Balaji was right guy, he built and sold a number of companies. I think at least two that I know of had nine-figure exits. Like, he's like real, right? He's a great entrepreneur. He worked at Andreessen Horowitz for a while. He was at Coinbase as the CTO. Like, he's a very real entrepreneur and investor. And so he's done well for himself financially. but like, I don't care how rich you are. Like, you don't go publicly bet people $2 million on, uh, Twitter unless you have some degree of confidence, because in some way, like, $2 million may or may not be a big number, but like, your personal reputation is, you know, quote unquote priceless. And so like, that's basically what he's staking here is he's using the money to draw attention, uh, to what he's saying. But really he's staking his reputation on something that a lot of people think is absolutely insane at the moment.

And the bet started because this guy Matlock, I actually don't know who, I forget his first name, but he basically tweeted something and said like, uh, hyperinflation is not going to happen. And then, uh, uh, Balaji replied and said, I actually think it will happen. And in fact, I'll bet, I'll take your million dollar bet that hyperinflation is going to happen in the next 90 days. And this is related to the Bitcoin, or that's another bet on top of the Bitcoin one. Then you wrote this post and you had one line, you had a couple lines in there that I hated. And by hated, I mean, uh, it was like, it stung me. Uh, one of them was, you quoted, uh, Lenin, you know, uh, uh, one of the folks who ran the Soviet Union. You said, there are decades where nothing happens, and then there are weeks where decades happen. You said that, and then you had a few other lines, and I started reading this, and I got scared. I was legitimately scared, and I texted you, and I was like, is this real? And you're like, um, maybe, maybe not. I forget exactly what you said, but, uh, you wrote this in such a way that I was I was fearful. Yeah.

So I definitely don't want to fearmonger, but I do think that, uh, there have been two points now in the last three years where it's like kind of a shake people and wake them up and be like, hey, pay attention right now. The first was, uh, during March of 2020, uh, I wrote a couple of different pieces. People had similar reactions to it. And you know, one of the pieces was like, I basically was arguing that unemployment was going to be double digits and millions and millions of people were going to lose their jobs. And I had people like privately emailing me and be like, you are insane. Please stop fearmongering. Like, this is crazy. And then the next week, 6.6 million people filed unemployment claims, right? And so like, if Balaji is like A+, I'm like D- maybe in analyzing some of this stuff. But at least what I want to do is call attention to like, hey, this is serious. And like, you should pay attention because if this goes the wrong way, it could be catastrophic, not only for people with their personal finances, but also like as a nation. And I think it's also important to call out that like, yes, it is important, but I don't think most people want this stuff to happen, right? Like the United States of America is this amazing place. There's millions of peoples around the world that try to come to this country. And it's because we have democracy and capitalism and stability and like all the things that we know make this country great. If we were to lose some of that stuff, like this isn't about a financial product or an asset going up or down in price. It's like if there is complete chaos in a country, people don't care about what currency they're holding. Like, they want guns, right? And like, that's not a world we want to live in. And so I think it's less about, uh, kind of finance and kind of investing, and it's much more about like, pay attention to this serious situation that's playing. I think that's what Blaschke's doing with this bet. That's what I tried to get across with the piece that I wrote, uh, last week.

You also had this other line where you said bodies keep floating, or you said, uh, a friend yesterday told me bodies keep floating to the surface. Meaning the Silicon Valley Bank, that's just one body and we're going to keep seeing more bodies. And so you like used a language that I'm fairly— I mean, I have a high-level understanding of this stuff, so nowhere close to a lot of smart people. But you use language that, that stung me. And when I see people who like you who write like that, it's almost like this is how I describe Malcolm Gladwell. When I read his books, they're so convincing. Tucker Max is another guy who does this. He's— they're so convincing because they're such good writers and they're so good at just explaining their points that I have to remember that when, like, a Malcolm Gladwell book, it's like, dude, this is all just a theory. And I could probably find lots of examples of why he's wrong, but he's so good and you are so good at writing about it that I, I begin to believe you. And I have to, like, pinch myself sometimes, like, wait, this is just his opinion. And there's actually people that are probably equally smart and equally experienced to have a different opinion. And I find that to be, that whole thing though, I find to be very confusing and unsettling.

It's, um, this viewpoint that like you want to argue ferociously one point of view so that the response, both the critiques and the support, is as ferocious back, right? If you write a piece and people are just like, eh, whatever, like, you know, I've heard this 100 times, like nobody even takes the time to respond. But on the internet, like you kind of have to go all in and really argue a point. But if you are intelligent, hopefully if you get new information or you see a critique that you're like, oh, that's actually a great point and you're willing to change your mind, then you can very quickly iterate your way closer to the truth. It's hard to always get to the truth. But I think that's kind of why I write that way is just argue ferociously and then you'll get the ferocious response and that will help you get to the truth faster.

What's the best— let me ask one question about this, Sean, really quick. What's the best argument as well as the best person that you like to read? That takes the opposite stance of you that you can see, that you can— you would say, if I'm wrong, I think this could be true. Like, who do you, who do you like to read that thinks you're wrong and they could be right?

So it's different on every topic, obviously, and even in individual situations. I have friends who I agree on 95% of stuff with, and then there's that one thing that they like vehemently disagree with me on. And I actually pay attention more when they disagree than to the person who disagrees with everything.

Right.

It, it's like once somebody has shown that they're a clear thinker and somebody's able to actually, uh, think through individual ideas and they don't just succumb to like, oh, Sam and I are friends. We always agree on everything. So like on this new topic, I should just agree with him. Actually, I wanna surround myself with people who they are very clear when they agree and they're very clear when they disagree. And what you want to look for is like volatility in agreement. So the more that somebody agrees with you, you pay attention and put weight on when they disagree. and then the more that somebody disagrees with you, uh, that you want to pay attention when they actually agree. So it's that volatility or that kind of reversion, uh, away from the mean that ends up being important to pay attention to.

But who, who, who, who are those people in this case? Is there anyone?

Uh, right now I would say, so it's less about like individuals. I think there's a whole cohort of people. Uh, everyone has kind of a little bit different view, but let me explain first kind of what's happening and then it'll help me, uh, explain why I think that there could be a counterargument to it as well. So the main argument is that if you go back to the beginning of 2020, uh, the economic and financial system was like pretty good, right? Unemployment was pretty low. Inflation was under 2%. Like we were kind of chugging along. We had been in a decades-long bull market. Everything seemed fine. Um, if not good, uh, obviously COVID happens and the first kind of big shock to the system was all the government lockdowns, right? So across the world, people said, hey, go sit in your homes. When you do that, what's called the velocity of money or the amount of commerce goes down. So if you used to go to the bar, if you used to go and buy stuff at the store, like you're just locked in your house now, you're not spending as much money. So when velocity of money goes down, people get scared. And when they get scared and they're fearful, there ends up being something called a liquidity crisis. And the best way to think of a liquidity crisis is just like, you look at your portfolio of assets and you're like, I want dollars, I want safety. And so you just sell everything that you can to try to get dollars. So people didn't care if it was stocks, bonds, cryptocurrency, if they had liquid, you know, real estate assets they could sell, commodities, anything. They just sell everything and they want dollars. And so if you go back and look in March of—

literally meaning cash in a checking or savings account.

So that's like step one. And then if you remember during, uh, March and April of 2020, people didn't know what was going on. Like I went to the ATM and I pulled out a bunch of cash. Like people were literally pulling physical cash out and they're like, well, just in case.

Right?

Like, who, who knows what's gonna happen? They also were like buying toilet paper and doing all like the crazy stuff cuz fear takes over. And so when these liquidity crisis happen, uh, all assets go down and the dollar becomes stronger. And central banks and governments have to make a decision. They can say, hey, we believe in the free market and we're just gonna like let this play out. Yeah, it'll be painful in the short term, but like the free market will kind of figure it out over time. Or they can, what they normally do, say, we are gonna intervene. We're gonna step in. We can't let our people suffer. And so of course, like politicians and central bankers, they're very short-term optimized because there's pain that millions of people experience, uh, on a day-to-day basis. And it's hard to sit by and watch people suffer. So it makes sense from like a human viewpoint as to why they would step in. Uh, although I disagree that many times they probably should not step in. And so that's what they did. They stepped in, they basically dropped interest rates to 0%, which just made it incredibly attractive to borrow money, right? If people are borrowing money, that means they're going and they're spending it. They're buying houses, they're buying all this kind of different stuff. And then they also pumped between the central bank and the politicians trillions of dollars into the economy. One key thing that a lot of people missed, including myself initially, is that regardless of how the money got into the system, the money ended up in the banks. So if they gave $1,200 checks to individuals, whether they bailed out the airline industry, whether they created all sorts of stimulus packages, whatever, when people received the money, whether they spent it or they held it, Someone, an individual or a company, put that money in the bank. And so the deposits of these banks exploded. Silicon Valley Bank is a great example. They had about $60 billion of deposits to start. They ended up having about $190 billion of deposits. So kind of 3x growth, $130 billion or so. But what does the bank do when all of a sudden people show up and like, here's $190 billion? They're in the business of making money. And so in a zero interest rate environment, they can't buy short-term debt, right? All that means is like they're buying treasuries that are 3 months, 6 months, 9 months, 12 months, 2 years, whatever. But all of that basically has no return because interest rates are at zero. So instead, what Silicon Valley Bank did is they went and they bought 10-year bonds, meaning that they're going to buy a bond today. If they hold it for 10 years, they'll get back their principal plus whatever the return on the bond is. Now, that bond that they were buying had about a 1.5% return. Right? So you buy it today, you hold it for 10 years, you're getting your principal plus the 1.5% type return over that 10-year period, which is a conservative play. Super safe, super conservative, backed by the US government. Like, everyone looks at Treasuries and like, that's the safest thing to buy right now. That is all good and fine if the environment continues how it is. What ended up happening is that all that money got pumped into the system. Inflation exploded. We had the highest inflation in 40 years. And so now all of a sudden inflation's at 9+%, and the central bank's like, oh boy, this is not good. We have to bring inflation down because inflation actually doesn't hurt rich people. Rich people make money on inflation cuz they own assets. It's the poor people, the bottom 50%, they're the ones who get hurt by inflation. So let's try to get inflation under control. And so the way they did this is they jacked up interest rates from 0% to about 4.5%. and then they started selling assets off their balance sheet. They sold about $1 trillion of assets. When they do that, basically they are tightening financial conditions, making it harder and less attractive to borrow money. What, what spend money?

What did they sell? What did they sell?

The central bank? Uh, this is actually a crazy statistic. They had about a $900 billion, uh, balance sheet coming outta the global financial crisis. They 10 bagged it. They literally went from $900 billion to $9 trillion between the global financial crisis and 2022.

Right?

So they expanded by buying all sorts of debt and treasuries and, and various assets. And that's how they get money into the system is they exchange the dollars for these assets. And then when they contract or they try to make tighter financial conditions, they sell all of those assets, right? Or, or a good portion of it to kind of get, uh, to pull liquidity outta the system. But when they did this, the banks are basically left holding the bag. And what I mean by that is The banks took that, you know, Silicon Valley Bank, $130 billion, $80 billion of it. They bought these bonds that earn 1.5%, which is great in a 0% interest rate environment. When they've now increased interest rates to 4.5%, that bond that you bought previously is no longer good. It's actually cheap. And so it trades lower. So if you spent $100 on the bond, now if you were to sell it to someone, maybe you could sell it for 80 cents. So you'd lose 20% on that bond. The reason why that doesn't matter historically is because the banks actually get special accounting treatment. So let's say that Sean has a portfolio and in one of them, uh, he bought a stock and he spent $100 a share, right? So he bought a stock for $100. If he goes to the bank and now the stock is trading at $80 and he wants to use that stock share collateral, they don't give them credit for spending $100. They're like, hey, moron, it's worth $80. Like, you get credit for $80, not $100. But the banks have a special accounting treatment where they can actually take some of the assets on their balance sheet and they can put it in a special area and they call it hold to maturity. Hold to maturity basically means we get to count what we bought it for, not what it's worth today. And the reason why they're allowed to do this is because they can hold the bond until the maturity, the 10-year period, and they'll get the principal plus the return. So as long as they don't sell it before it matures, then it ends up being worth what they paid for it. The only time that this does not work is if all of the depositors want their money back at the same time, because now the banks have to sell all those assets and take that money to give back to depositors. And that's what happened to Silicon Valley Bank, is basically there was a bank run when the bank run caused the bank to sell assets, they lost billions of dollars, which then scared more depositors. So then they went and said, hey, gimme my money back. And it just became this reinforcing cycle. And in 24 hours, $42 billion was drained out of the bank, which caused them to eventually be insolvent. And the government took it over.

And ultimately, great explanation. That was awesome. You killed it there. Balaji and a few other people are betting that that's gonna happen to other more consumer-based banks in the next 90 days. Is that right?

So it's already happened. Like, this isn't just a Silicon Valley Bank thing. Like, a lot of the politicians, they— this was like a softball served up to them, down, you know, right down the plate. They were like, oh great, the crypto and tech companies are a bank customer, it must be their fault. But like, Silvergate Bank, Silicon Valley Bank, Signature Bank, now Credit Suisse— like, these are not, you know, crypto banks or just tech banks. This is a complete global financial, uh, system issue. And now there's reports coming out that hundreds of banks are actually underwater in terms of holding these assets. And so that's why you've seen the central bank and the governments around the world step in and say, we will backstop a lot of these deposits, because they don't want people to be so scared that they go and they try to take their money out of the banks. Because if everyone goes to do that, that then basically creates a cascade of bank runs. And so Balaji's argument and why he is making this bet is that when the government steps in to protect the depositors, that is an inflationary pressure and it's going to take trillions and trillions of dollars to do it. And so at the same time, you're getting trillions of dollars of inflationary pressure. You also are getting this psychological awakening and people are saying, wait a second, maybe the dollar isn't as strong as we thought it was. I should look for an alternative. And when those two things happen, hyperinflation can occur. Doesn't guarantee it, but it can occur. And I think really, if you kind of boil down his entire argument and why he's created this essentially meme with the Bit Signal is that people in the United States, we've never worried about this, but this is not new globally. There are people listening to this podcast right now. They, they'll tweet at us afterwards. They'll be like, dude, I live in Argentina. Like inflation's like 70, 80% year over year. I live in Venezuela, I live in Zimbabwe, I live in all these countries where they live with hyperinflation on a day-to-day basis. It's just that in the US we've never thought about it. And then two is like, you, uh, you add complexity because the United States dollar is the global reserve currency. So if we screw this up so bad that we hyperinflate the dollar, I don't even understand. I don't think a lot of people understand like what happens globally when the global reserve currency hits high inflation or hyperinflation. So again, it goes back to like, we don't want this to happen, but damn, people should be paying attention right now to make sure that they understand what's occurring and kind of how to prepare for it. I can't find this client info. Have you heard of HubSpot? HubSpot is a CRM platform, so it shares its data across every application. Every team can stay aligned. No out-of-sync spreadsheets or dueling databases.

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So let me, uh, add a little color on what you just said. So, um, there was a— Balaji tweeted this out, which is a, a, like a memo or a note from the Kansas City office of the Federal Reserve. And they had said— there's kind of this like one section that he highlighted which it said, um, at year-end 2021, so basically 2 years ago, only 4 community banks were below the kind of 5% ratio of, uh, of their, of their assets that they had available. So they were basically only 4, 4 banks would be at this threshold that we would be worried about. Um, fast forward to today, that's now 333 community banks in the United States. So 333 community banks are essentially insolvent is what this, what this means. And could be if there was a bank run on any one of these, we would have the same problem that we had first at Silicon Valley Bank and then what was about to happen on, you know, last Monday or whatever, where everybody was going to go to, you know, I know here in California, First Republic Bank was like, you know, the domino that was ready to fall before they came in and said, no, no, no, everything's, everything's safe. All your deposits are guaranteed. Don't worry. To try to stop that from happening because there are 333 banks just in the United States that they say are below that ratio. Now what that would do to the next tier, who knows? And also, uh, overseas, because the, the dollar is the, the reserve currency overseas, there's a bunch of banks that hold, um, dollars, and they're, they're worried about what if there's a bank run on us. Um, and so like, you know, just last night, overnight on a Sunday night, you know it's bad when they're sort of working on a Sunday night and, you know, making these announcements, uh, where they're like, oh, we're, we're establishing this like swap line. And it's like, what's the swap line? Swap line is basically Hey, we'll bail you out too. So if you need dollars, the Central Bank of the United States will give it to you, to European Central Bank and all these other places. So they basically established this overnight back channel which said, if you need dollars because you're going to get hit with a run, we don't want you to fall over and cause this cascade of fear and panic and withdrawals. So we will also backstop you just like we backstopped, uh, you know, the community banks in the United States. So that's To, to Balaji's credit, I think he is correctly identified, just like he did with coronavirus, that, hey, this might be a lot worse than you think. Um, and there's actually data to support that the conditions are worse than you think. Now, what's funny is Balaji actually did this twice. So he had like a V1 of, of trying to spread the word. Sam, I don't know if you saw this one. So the first V1 was, he goes, the bit signal. He goes, how do you raise, ring the fire alarm on the internet? How do you show it's not a false alarm? I'm putting up the BitSignal. He goes, I'll put $1 million in Bitcoin to alert people about this stealth financial crisis. I'll give $1,000 to the best 1,000 tweets that show a reply with a graph, a stat, a meme that will bring attention to what's happening. Because the central bank, the banks, and the bank regulators have bankrupted us. They're trying to hide the insolvency of the banks to you, the depositor, which is a weird thing to do, right?

That's like, it's helpful that he's, he's trying to help, but it sometimes that doesn't help, right?

This was a pure giveaway, right? There's not a bet. He said, I'm giving away $1 million to the— I'll give $1,000 to the 1,000 best tweets that will spread the word. This tweet did pretty good, 13,000 likes. Um, and he tried, but then he hit you with just like a bunch of like, you know, things that to biology is like light reading, but to the rest of us is like, oh man, like I gotta, you know, I gotta hook up to an oxygen tank just to intake this amount of information. So it's like this, uh, this this crazy thing. So he'll tweet this table of like, you know, 45 currencies that have done hyperinflation. He'll tweet out a thing that basically shows some random meeting minutes from the Fed in 2022 that showed that they knew something, right? Like all these, these data points. But it wasn't really going viral until this guy James Medlock comes out and he goes, I'll bet anyone $1 million the US does not enter hyperinflation.

And James Medlock, by the way, I think, by the way, he had it, it was even scarier. I think he said, Everything that we're talking about, by the way, it's within 90 days of last week, right?

No, no. First it was James just said, I'll bet anyone $1 million hyperinflation doesn't happen. Okay? That was that guy's tweet. Biology just takes this random—

By the way, I interrupted you. Say who he is. Say who he is.

I don't know who this guy is. His bio is a social democrat, market socialist in the sheets. I don't know what this guy's talking about. This guy's like, it's a meme account. It looks like. So, um, you know, like he's got a picture that I don't know who this is.

Meme Lord with his million dollar bets.

Yeah, exactly. You know, his email is at mastodon.lol. Okay. So like, let's be real about what's going on there. So Balaji comes out, he says, I will take that bet. You buy one Bitcoin and I'll, I'll send $1 million to an escrow. To be clear, this is 40 to 1 odds. So he is basically saying, not only is this unlikely to happen, like if this was even odds, It would have been like, dang, Balaji's going to lose $1 million because Bitcoin's not likely to be worth $1 million. Then he added, in 90 days, which is already a radical move. Then he said, I'm— and by the way, the $1 million versus 1 Bitcoin. Bitcoin's currently at $26,000 at this— at the time he made this bet. He goes, that's 40-to-1 odds that I'm laying you. And he says, uh, all we got to do is find some, you know, a mutually agreed on like escrow or custodian. Um, and he again, he tweets out this BitSignal graph. And so he's like, you know, I'm doing this again. Now this, this tweet goes viral. This one gets 11 million views because it's more provocative. It's, it lets anybody, and at first the wave of tweets, myself included, was like, apology's nuts. He's gone crazy. Uh, like this doesn't make any sense. And, uh, and so, you know, cuz it was like, not only was the bet unlikely to prove in his favor, it was a perfect bet for Mr., you know, James Medlock over here, the social, the Democrat in the streets and the socialist in the sheets, all he had to do was buy 2 Bitcoin, right? He could buy one that he's putting up for the bet, and if he's wrong and Bitcoin and the dollar does hyperinflate, Bitcoin becomes worth $1 million. All he had to do was buy a second one. So if he could, for $52,000, he could guarantee himself a $1 million payday. So it was like an absolute no-brainer. And, and you know, the poker player in me was like, Balaji, what are you doing? That's a, you've given this guy like a, you know, a no-lose bet. And so I messaged him and I was like, uh, you know, hey, Balaji, this is crazy. What are you, what are you thinking? And here's what he, here's what he replied. I, I think I could share this cuz it's not, uh, not anything that he's not tweeting out. He's tweeting all this stuff out anyways. So it's not, it's not overly crazy, but here's what he said. So he goes, he just replies, all the banks are insolvent. That was the first, first reply. He goes, have you seen The Big Short? Where one guy figured something out early and everybody else thinks he's crazy. That's what, that's what's happening here. He goes, uh, people think this was a single bank issue like Silicon Valley Bank. It was a central bank issue. All the banks are dead. 10 days ago there were no dead banks. Today there are 5. And if people realize this and they'll start to pull their money out, they'll realize that the banks don't have it. It's Uncle Sam Bankman-Fried, not Uncle Sam. Uh, which is what basically what happened with FTX. So people realize the money's not in the, the money's not in the, in the bank with, with FTX. And then that caused, uh, you know, the, the extreme crash. Um, and then he tweeted out a bunch of stuff and he goes, uh, he goes, I'm not doing, he goes, yes, I'm not doing this to make money. Cause I pointed out that the guy could just hedge and win the bet. He goes, yes, I'm not doing this to make money. He goes, if I had the beliefs that I do and I was just purely selfish, I would simply just take the million dollars and buy 40 Bitcoin. I would take, you know, another million dollars, buy another 40 Bitcoin, and I'd do it quietly because I believe that the US— that the million dollars is going to be worth zero in 90 days. I'm doing this to alert innocent people and to send a message: get to the exits. And so I want to bring up a couple of, like, cases here. So that, that's the bad—

hold on, really, really, really quick. There was also this other thing apparently right around this time. There's a picture of him. So this guy, Biology, he's like, has this, like, We got to throw up the picture on the YouTube video.

Got to throw up the picture.

So he's got this stereotype of being like, you know, like the forgetful scientist of like he's just this guy who only cares about being brilliant. And oftentimes he's right and he's eloquent, whatever. There's a picture of him. It looks like he's giving a seminar at like a university. And someone tweeted, he goes, biology's saying get the fuck out of the US. And it's, and it's very scary. And he's sitting there giving this presentation. In front of like a class and he's wearing pajamas, like a pajama looking hoodie, basketball shorts and Nike Air Jordan flip-flops with his laptop sitting on top of like two cardboard boxes. And so if you needed like this, this, any more of this stereotype of this like brilliant, like, you know, of this, the image that we have of Mark Zuckerberg, you know, just sitting in a hoodie coding, eating pizza and drinking Red Bull. Biology's going all in on that image, and it almost makes it worse when I see this picture.

But, but I think a lot of why he has so much credibility is that he has been able to identify a number of these, like, exponential situations. And if you really think about what he's saying here, it's almost an exact overlay to COVID, right? He saw very early on a couple of data points And he was able to extrapolate from a couple of those data points, hey, this isn't a linear line. Like, this is literally an exponential curve. And the top of the exponential curve is really scary. Like, let me go yell, scream, and like call attention to it. He's doing the exact same thing here. And I think that's, uh, what Sean was reading about. Like, hey, 10 days ago there was no dead banks. Now there's 5. Like, he's just trying to put a couple of data points and be like, if this goes exponential, like, this is really bad. And I think that one of the components, uh, that's important to call out is like, I don't know what the percentage is of Americans, but most Americans don't know that if you go and you deposit your money in the bank, it's not your money anymore. Right? Like just that alone, like the, the lack of financial education of the average American is astonishing. And so yes, there's FDIC insurance that covers up to $250K. Like there's all these different things. But if you go look right now, like the FDIC does not have enough money to backstop every bank in America.

I think they used $20 billion or something. I think 20% of it was used to help Silicon Valley Bank. And that's Silicon Valley Bank. Yeah, Silicon Valley Bank is like the 20th largest bank in America.

Yeah.

So it's like not, not very big compared to the big, big ones.

One other thing that I think is important to understand about these situations is this idea of like a digital catastrophe. And this is a concept that, frankly, I struggled a little bit to come up with like a good name for it. But I think digital catastrophe kind of really articulates it as best as I can, which is you need to understand this concept because it is going to become very, very common in our lives over the next, you know, 20, 30, 40 years. But the way that I define a digital catastrophe is it's an event that occurs that is negative, usually plays out in the analog world, kind of the real world, but it is drastically accelerated by the speed of communication and action online. And so Silicon Valley Bank is like the prime example. Right? If you think about what happened there on Wednesday afternoon, they made an announcement. By Thursday morning, people were scared. By Thursday afternoon, $42 billion had been withdrawn from the bank. And by Friday morning, the bank was dead. Right? So like in 48 hours, it was the second largest banking failure in the United States history. But in the old days, what you would have to do in order to have a bank run is like Sean would walk over to Sam's house and be like, yo, Sam, did you hear like the bank's probably not doing so hot? And then like Sam be like, huh, that's kind of crazy. And you would walk, ride your horse, maybe get in a car and like show up to the bank physically, wait in line and be like, when you get to the teller window, can I have my money back? Like that takes a lot of time, effort, energy, all that type of stuff. Now you can literally open a new tab on your browser, click a couple buttons and move your money. And so when the speed of information occurs that it does on the internet, millions of people, whether you were a customer of Silicon Valley Bank or not, like Twitter knew that the bank was insolvent by like noon on Thursday, right? And so if that happens, that's how you get $42 billion withdrawn from a bank. That is a digital catastrophe. It's the speed of information. The speed of action online has real-world consequences. And so another way to think about it is like the internet was weaponized to create the second largest bank failure in history, but it was in response to the knowledge of an insolvent bank that was caused by a fractional reserve banking system and an increasing of interest rates that basically left the bag holders as the banks. And so people were just operating out of personal incentive to get out of the way.

Yeah, there's a, there's a, it was kind of amazing. Like a Thursday morning, I remember waking up and in our group chat, Sam, there was like somebody posted Silicon Valley Bank stock was going down. Uh, I was down like 30 or 40%. It was like, oh wow, must have had a bad earnings call, right? Or, you know, that was kind of my assumption. It wasn't anything too, too bad. Uh, you know, by 11 or noon, I'm scrolling Twitter and I start to see, you know, if you scroll— this is just a general truism— if you scroll social media and you see 4 or 5 different sources talking about the same thing, your brain is just like wired to be like, this is now a, this is a big deal. Topic X is a big deal. Marketers use this to their advantage when they want you to like, bunco buy a product or know about a movie that's coming out or whatever. They do the same thing. That's why they get, why influencer marketing's a big deal. But it also works just organically. If 5 people say the same thing on, in one Twitter scroll, I know that something's up. And so I remember being on the phone And basically in the manner of like 15 minutes, it was like, I'm on the phone. We're not even really sure what to do. It was like, uh, let's just be safe. Take it out. Sent an email to, you know, sent an email saying, hey, we're taking it out. Opened up a new tab, clicked wire the money, took a screenshot of the wire, sent it back into 6 group chats, then went ahead and tweeted out a, a thing. Dude, it's like, wow. Like in 15 minutes I just like propagated this more than I could have done if I, if it had been my full-time job. you know, 20 years ago, which is kind of what, to, to your point. And, and the funny thing is people are mad that like, they're like, well, if there wasn't a bank run, there would've never been a problem. And it's sort of like, it's, you know, they, they use this example of like, what, what's it called? Like screaming fire in a movie theater or something like that. It's like then everybody runs to the exits. Well, the reality is if there's no fire in the theater, everybody run to the exits and getting stuck there, then, you know, trying to get out, like it, it's not that big of a deal. There was actually a fire. And so, like, you know, I don't know how the blame gets shifted to the people who successfully got, got out of the fire versus, uh, pointing out that, hey, somebody caused this thing to catch fire, which is kind of Balaji's point. Balaji, he tweets out this graph of the, like, the, the balance sheet or whatever. It's basically like goes up, up, up, up, up, which is like during the money printing era. Then the last year, year or so, it's been trying to tighten, so it's been going down. Contracting, and then like overnight it just goes straight up vertical like no graph you've ever seen because this $2 trillion was basically of liquidity was added to the market. Now some people say no, it wasn't really like put into the supply. Like Poppy might have an idea about this. Some people say, well, that $2 trillion is not really being given out. It's not going into the supply. It's kind of just there as a borrowing facility in case the banks need it. In order to like prevent any panic. Um, and other people say money printer go brrr, that's the same thing. So, you know, what are you talking about here? I don't know. Do you have an opinion on that?

You know when you're in like high school and, uh, there's the like, but actually kid in class who like sits there in the corner and no matter what anyone says, like, but actually, and they try to tell you about something they read or this or that or whatever.

It's actually called Barthelona.

Exactly.

Oh, you mean bruschetta? No, I mean Bruschetta Karen.

Like, that is those people on the internet, right? These people who, uh, they're the same people during COVID that were like, uh, but actually, and then they would go on some rant, right? Like, no, the government locked us in our homes and literally printed trillions of dollars and created 40-year high inflation and absolutely screwed millions of people. I don't care what but actually you have to say. And then you look at the same situation is like, they were like, but actually inflation will be transitory and it will come back down. Right? And then you're like, no, that's not how this works. And so ultimately what you end up having, which makes markets— so like, this is a part of capitalism— is you have theory meet reality. Sometimes theory is a great primer and overlay on reality, and other times it's not. And what I've learned over time is that the more complex the system, the less likely it is that the theory overlays perfectly on reality. And like, there is no more complex system than the economic system of America, let alone the world. And so all these people who are like, oh, uh, inflation will come down because the Fed will do this or that. Well, like, the Fed isn't the only thing that contributes to inflation. There's supply chain disruptions, there's geopolitical war, there's like all these different components to it. And so I think that you've gotta be very careful just looking at theory and trying to impose theory onto reality. But the other thing that I would say throughout this entire, uh, kind of cycle or, or, uh, new, you know, kind of news development, man, are we lucky we have the internet. Like the internet is the greatest place in the world. And like Sean did a great job explaining, you know, you can propagate some of this information, but imagine being in the 1950s or '60s and like you basically could read the newspaper and maybe you watch like the nighttime news. And you have to listen to the talking points from the like public narrative or like the, you know, the government or the Fed or whatever. On a daily basis, there are things that are said by those who kind of set the public narrative. And within seconds, people on the internet destroy the narrative and they're like, nope, that's not true. Here's these 5 points. And like, I don't care necessarily who's right or wrong every single time as much as it's like, I want both sides. I want what the people in charge are saying. And then I want the people who like think the people in charge are idiots are saying, and then I'll kind of like think for myself, but the internet is what has empowered that. And so like, wow, what an amazing time for us to be alive, to have that ability. Because literally two generations ago, they didn't have— like, what are you going to do? Go to the encyclopedia and look up like, what is a bank run? Right. Or like, how does central banking work? It's just amazing that we now have this capability.

So I think we should wrap this segment up and I want to wrap it up by each of you in just a couple sentences saying, what do you think is going to happen in the next 90 days? And what are you, are you guys doing anything?

Sean, you go first.

Okay. So I'm going to say, uh, two things. I think in the next 90 days, um, I basically, I think Balaji is actually correct on everything except for his 90-day point. Because I think that's too hard to know. And he might end up being correct that it, something happens in the next 90 days, or it might take 900 days. And I think either way, the important part is he was right. It's just the time, the time window, I think makes things impossible. But the good news is you don't actually need to know the time window to act accordingly. I've said this for a very long time, and I think what Balaji's saying is a much louder, better version of that, which is For a long time, people thought, um, if you're buying Bitcoin, you're trying to make a buck. And from the beginning, once I started to understand what is this, I was like, oh, this is not about making money. It's about saving money. It's a savings technology, which is basically to say, even when inflation was only 2 or 3%, if you just look at 2 or 3% over a 40 or 50 year period, the money that you have in the bank will still, if you put $100,000 in the bank, it'll still look like $100,000. but it will only have the buying power of something that's $60,000, for example. And so why would you ever save your money in something that is designed to lose purchasing power? You wouldn't, like, you wouldn't do that. And so I don't think that it's a, uh, so I've always thought Bitcoin's, the core value of it is it's a savings technology. It's a currency whose one big feature is it doesn't inflate. And so, you know, if you wanted to save your money, you'd rather save your money in something that doesn't inflate, cannot inflate. Versus something that either inflates slowly or quickly, right? Low inflation or high inflation. I don't want any inflation if I'm saving my money. And so anyways, I think that he is correct about if you're going to save money, you should do it in a hard currency that's not going to inflate. I've already been on this bandwagon, obviously been the kind of crypto person that's, uh, you know, obviously a believer in crypto, created the Milk Road because I believe in crypto, still believe in crypto. And so nothing has really changed there. In the next 90 days, I would guess that Balaji looks like a fool because people are going to point out that it didn't happen in that time period. But in the next 900 days, I think that he will be proven correct.

In 30 seconds, Pomp, what do you think? Or 60 seconds?

I think that Balaji is correct. Similar to Sean, the timeline is hard to get there. I will put a higher probability on the 90-day timeline than most because I do think that there's tail risk, and mainly it's because when hyperinflation happens, it happens very fast. Like in episodes of hyperinflation, everything's fine. 90 days later, there is hyperinflation. So it's less about like, has this ever happened? And it's more about like, is it going to happen? Uh, again, I'm like maybe 5% because I do think there's very systematic, uh, problems and issues currently in the global financial system. I do think that the banks or the central banks, when faced with save the bank, save the dollar, will save the banks, which will lead to inflationary pressures. But I would not bet $1 million that Bitcoin will be $1 million in 90 days.

Whoo! Are you guys hyped up or what?

I'm ready to go get a fight. We should say, say one thing, which is the, the, the, the, the other take that people have on this, which is that if Balaji has like $100 million of Bitcoin, he doesn't need to be right for this to be a profitable bet for him. So if he's got $100 million of Bitcoin already, Bitcoin's— Bitcoin's up like 20% last week or something like that, but it's up like, you know, 4 or 5% right now. You know, he basically would only need to move it by like 3% or it only need to move up by 3% in order for him to be profitable losing $2 million USD if he's got $100 million of Bitcoin, which I suspect that he does have $100 million of Bitcoin. I think he now has moved 90— I think he said this, he's moved 99% of his net worth into crypto. Um, and so, so I, I don't think— I think he can be directionally— I think he can lose the bet and still make money and be doing the thing that's, you know, to his beliefs, the right thing to do, which is alert people that the, that the banking system is, uh, is currently broken. And, um, and, you know, he is the Michael Burry of, of our industry. So we'll see if he's correct.

Dude, I just feel like I drank— just drank like a liter of Mountain Dew. I'm just like Drinking buckets of dew.

I'm just like, people want to know, Sam, when Pomp tweeted out that he's coming on, people wanted to know, how you going to sit in a room with the two of us and still be sitting there in cash ETFs and not own any crypto? At the end of this segment, well, hold on, 51 minutes of hell. Are you in on, are you going to go buy Bitcoin or what?

I own Bitcoin.

I own, uh, not that I own it from 2015, a small percentage.

No, no, no, no, no, no, no. I've made purchases and I don't have cash. I have real estate and I have, but here's the thing though, which is in hyperinflation periods, I own equities. Those also go up. I don't, you know, to get to $1 million, Bitcoin right now is at $27,000. You know, that's like, what's that like 50x or something? I don't know if equities will 50x, but I mean, they will go up.

Yeah, maybe. But also all those businesses run in dollars and all their earnings are in dollars. If dollars are not useful anymore, right? Like the whole system. That's the thing. I'm a Bitcoin bull, and you don't want to see this happen because the world will be chaotic. Absolutely chaotic. It will be bad for a lot of people. I think everybody, even who's the biggest Bitcoin bulls— you said this yourself, Pump— you're not rooting for it to happen this way. A slow transition is really the only thing you want. A fast transition would create a lot of damage, and so you don't really want that to happen.