Most of the time when you see a headline that an investor “lost a bet,” it simply means that they made an investment that didn’t pay off. But this is not one of those times. Cryptocurrency investor Balaji Srinivasan made a literal $1 million bet with Twitter user @jdcmedlock involving the prospect of US hyperinflation, and cryptocurrency Bitcoin rising to a value of $1 million US per token as a result.
“I’ll bet anyone $1 million dollars that the US does not enter hyperinflation,” the latter tweeted, leading to this somewhat complex response from Srinivasan:
“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 with a smart contract, we can do it on chain, so I can send USDC.
If you won’t do that, name a custodian.”
Dan Kitwood/Getty Images
Twitter user @jdcmedlock, who goes by the name Jason Medlock online, told Quartz that his originally tweet was just a joke that Srinivasan apparently didn’t get:
“The joke itself was that, in the event of hyperinflation, the million dollars wouldn’t be worth very much anyways, so it was a no-lose situation…But hyperinflation is extremely rare, usually happening in times of conflict or institutional collapse. With the US dollar being the global reserve currency and our institutions being relatively stable, hyperinflation today would be without precedent. In fact, a banking crisis might end up being deflationary, as the loss of deposits would reduce demand.”
Srinivasan ended up settling the bet well before the 90-day deadline explaining in a post on his blog that he did so to make a point: “I spent my own money to send a provably costly signal that there’s something wrong with the economy, and that it’s not going to be merely a financial crisis, but a fiat crisis.”
As for Medlock, he says he’s given away $500,000 of his winnings to charity, and paid another $240,000 in taxes on the payment. As for what he plans to do with the rest, he tells Quartz:
“I’ll pay off some debt, build a nice cat house for my neighborhood feral, and invest in a much better investment than BTC, namely low-fee index funds.”
Medlock is clearly a Bitcoin skeptic, but he did manage to win a million dollar bet thanks to enthusiasm from one of its adherents, so maybe it isn’t all bad in his book.