It has been a surreal week. The banking crisis continues, and it feels like the world is ending. Personally, I feel that people are overreacting and let me present you the most outrageous tweet I've seen all week, as shown above. Prominent tech/crypto investor Balaji Srinivasan predicts that BTC will hit $1M in 90 days due to hyperinflation, and he is betting $1M of his own money on this event happening. I personally found this claim absurd and I think people in Silicon Valley need to chill and stop making outrageous claims. But I could be wrong. Laugh at me if Balaji turns out to be correct in 90 days.
I asked ChatGPT to write a story about how the banking crisis could cause hyperinflation and lead to BTC's value rising to $1M. Here is the result, after some editing to reflect current events:
Once upon a time, there was a country called America, known for its robust banking system with many banks operating within its borders. However, the banks had stopped managing interest-rate risk carefully after a prolonged period of a zero-interest-rate environment.
As the pandemic hit in 2020, there was a significant labor shortage, and inflation started to creep up. The central bank started hiking rates, and many banks became insolvent because the long-duration fixed-income assets on their balance sheet lost a lot of value. The government, fearing a collapse of the banking system, stepped in and bailed out the banks using taxpayer money.
However, this only served to delay the inevitable. The banks held many 3% 30-year mortgage loans and 2% 20-year treasuries, leading to deep losses. The government could no longer keep bailing them out, and the banks began to fail one by one, leading to a full-blown banking crisis.
As people lost confidence in the banking system, they began to withdraw their money and hoard cash, causing a shortage of cash in the economy and leading to rapidly rising prices. In desperation, the government began to print more and more money, leading to hyperinflation.
Meanwhile, many people began looking for alternative stores of value and turned to Bitcoin. As more and more people bought Bitcoin, its value skyrocketed, reaching $1 million per coin.
The government, seeing the success of Bitcoin, decided to embrace it and began to use it as an official currency alongside the hyperinflated national currency. This helped to stabilize the economy and restore confidence in the financial system.
However, it was a hard lesson for America. The country had to rebuild its banking system from scratch, which took many years to recover fully. In the end, the crisis taught the country the importance of responsible financial management and the need to diversify its economy to avoid relying too heavily on any one industry.
Honestly, the story doesn’t make sense. The US dollar is the reserver currency of the world and that’s not changing any time soon so hyperinflation is unlikely to happen and if the government doesn’t want people to hoard cash, they can raise the FDIC insured limit.