Bitcoin to $1 million? Why hyperinflation is unlikely in the US

Balaji Srinivasan, former CTO of Coinbase, caught a lot of attention last week with his bet that Bitcoin will reach $1 million in the next 90 days, and also received a lot of criticism for his “unrealistic” prediction. Saifedean Ammous, one of the biggest Bitcoin bulls and the author of the most successful book about the leading cryptocurrency, “The Bitcoin Standard”, has now shared his opinion also.

Why hyperinflation is unlikely in the US

Srinivasan’s bet was a response to financial expert James Medlock, who bet $1 million that the United States would not enter hyperinflation despite the recent collapse of banks in the country.

In a Twitter thread on March 17, Balaji stated that the current banking situation is similar to the 2008 financial crisis, but this time central bankers, banks and regulators lied to everyone. According to Srinivasan, the banks saw the crash coming but were given permission by regulators to hide their literal insolvency. Hyperinflation is therefore inevitable, he concludes.

However, according to Saifedean Ammous, the realities make this unlikely. “I feel dirty and sound bearish on Bitcoin, but I don’t think Bitcoin will hit $1 million in 90 days, and I don’t think the dollar can possibly hyperinflate this quickly,” the author wrote today.

The reason, according to the spokesman for the Austrian school of economics, is that a banking crisis is deflationary, although Srinivasan is right about the scale of the banking crisis. If one bank goes bankrupt, the money supply is reduced. If all banks fail, much of the money supply will be destroyed, which will make hyperinflation less likely.

In addition, Ammous claims that even if central banks will respond by printing money, which could lead to price increases, hyperinflation is highly unlikely in such a short time. Even if the US Federal Reserve were to bail out every single bank depositor, it would only keep the money supply constant, the economist explained, saying:

Yes, they will probably print more than that to finance increased spending for political purposes, but you would need an incredibly large amount of printing to produce hyperinflation in 3 months, and history provides plenty of evidence to support that.

Bitcoin will slowly rise, as will inflation

Ammous also refutes Srinivasan’s hyperinflation examples, which claim to show that inflation can accelerate in just 90 days. According to the economist, all hyperinflation came at the end of a longer period of inflation.

“Even in highly dysfunctional countries with decrepit monetary and financial institutions and no global reserve currency, it takes many months and perhaps even years to get to the point where the value of a currency falls by half in a day, which is the kind of hyperinflation needed to get to $1m / Bitcoin in 3 months,” the author said.

Similarly, Ammous calls the example of Lebanon inapplicable, as the Lebanese lira devalued overnight after years of slowly rising inflation, “and that’s what gives his chart such a big sudden increase.”

Even in a country that was massively corrupt and indebted, that didn’t have the global reserve currency and printed money on a scale “hard to imagine” in the US, it took years. According to Ammous, hyperinflation in the US in three months is therefore virtually impossible, and with it a Bitcoin price of 1 million dollars.

At press time, the Bitcoin price was at $28,073; Traders appeared to be cautious in light of the US Federal Reserve’s interest rate decision due today and the new projections (dot plot).

Featured image from iStock, chart from TradingView.com