For the first time, since the 1930s, we have a decline in M2 on a year over year basis started in December. It looks like it'll be down 3% in March; I believe this has all the hallmarks of a deflationary, potentially a deflationary bust. Deposits are leaving the banking system because money market rates are so much more competitive than what people are getting in their bank accounts.
On March 17, 2023, Balaji Srinivasan wrote a tweet thread that started with a simple, shocking bet that the price of one Bitcoin would reach $1,000,000 in the next 90 days. Balaji is an American entrepreneur and investor. He was the co-founder of Counsyl, the former Chief Technology Officer of Coinbase, and former general partner at the venture capital firm Andreessen Horowitz. ARK CEO and CIO Cathie Wood agrees that the price of a Bitcoin could reach $1M, but ARK’s prediction on when this might happen is very different. In today’s episode, Cathie and Balaji discuss their current and future outlook on the United States and global economies, the cryptocurrency ecosystem and their reaction to the recent volatility surrounding the regional banking crisis.
Key Points From This Episode:
- An introduction to Balaji and his prediction that Bitcoin could reach $1M in the next 90 days
- Cathie sets up her initial argument that we are in a deflationary environment
- What we can learn from Argentina; when it was printing money while simultaneously raising interest rate
- Balaji argues that there are only three true currency pairs in the world today
- Balaji’s belief that there is a desire to exit the American financial system and that the financial system itself is inherently hard to predict
- Cathie shares her thesis that that the velocity of money is starting to flatten
- The potential for a “hard landing” in the economy
- How the recent regional banking crisis effects Cathie and Balaji’s predictions on inflation
- Balaji compares the Federal Reserve (Fed) Funds rate to Bitcoin’s issuance schedule
- How the 1980s compare to today in terms of inflation and interest rates
- Cathie provides a brief history on the guiding force behind Fed policy
- What could potentially happen to the use cases of Bitcoin should it rapidly increase in value
- Balaji’s belief that the world is running backwards in time but that the outcome will be different
- Why consumers have started to move money away from banks and instead have focused their attention on trying to earn yield on their money
- Why today’s economic events could be considered black swan events
- Balaji states that we may not have a widespread bank crisis, but instead we could specifically have a central bank crisis
- The potential that the Fed could be looking at the wrong indicators
- How the very existence of Bitcoin might defeat Keynsian economists theories at their core
- Why deflation might be a good thing for Blockchain technology
- Why Balaji believes states should continue to support cryptocurrencies
“Fiat currency”, as referred to in this podcast, means traditional, government-issued currency, such as the US dollar.
