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

Shaan Puri

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

Sam Parr

The second thing in that episode is that the whole episode is about something that's going to happen inside the next 90 days. So, if you're going to listen to it, it can be a little fearful. I encourage you to actually listen to the whole thing because we're talking about something that's happening in 90 days. Then, go ahead. The second episode was way more fun, and it was pretty wild. Go ahead.

Shaan Puri

We talked 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...

Sam Parr

it's huge

Shaan Puri

He turned off all his advertisers, which amounted to $1,000,000 in advertising. What he's doing instead... So we talked about that, and then it went off the wall. The podcast got a little crazy, but in a great way. I think people are going to love part 2.

Sam Parr

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

Shaan Puri

Pretty funny stories! Pop is usually pretty buttoned up on his main channel because he's talking finance; he's talking serious topics. However, he tells some pretty funny stories. So, the second part is the more fun episode, while part one is the more serious episode. I think you'll like them both.

Sam Parr

And we have to remind you guys that our episodes... we work really, really hard. 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 "Lady's Understanding."

Anthony Pompliano

the lady's understanding

Sam Parr

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 click "subscribe" on YouTube. Then, just go ahead and do that on Spotify and iTunes. The more you do that, the more our volume goes up, and we get more downloads. This way, we can keep doing this type of stuff. Pomp isn't going to come on episodes like this if we don't have a big listenership, same with all the other guests.

Shaan Puri

alright enjoy

Sam Parr

pomp we're live by the way we we always just jump right into this thing no small talk

Anthony Pompliano

let's go what do you guys wanna talk about

Shaan Puri

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

Anthony Pompliano

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

Sam Parr

So, I was pumped! We have a lot to talk about, and we'll do a proper intro in a second. I was talking to my friend Jason Janowitz, who you guys used to work with. He works for you now and has his own company. Jason works pretty hard. He told me that you were the hardest working person.

Shaan Puri

used to work for you

Anthony Pompliano

He and his partner, Mikey Pulido, were the two guys who helped me start the podcast initially. They tricked me. They literally came to me and said, "Hey, you should have a podcast." I was like, "What's a podcast?" They were like, "You know, like all these other examples." Then I said, "I don't know how to do that." They replied, "Well, we do." Little did I know, they had no clue what they were doing. They instead convinced me to do a podcast. Then they DM'd, I'm pretty sure, Gary Vaynerchuk's podcast guy and said, "Hey, we're going to start a podcast. What equipment do we need?" Kudos to those guys; that was a pretty sweet hustle.

Sam Parr

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

Anthony Pompliano

I think it's probably both. One of the things I always use as a framework is that there's kind of a gas and brakes in life. At certain points, you need to hit the gas, and other times you can kind of let your foot off the gas and coast like a car. Then, there are other times when you need to hit the brake. Knowing when to hit the gas and when to hit the brake is pretty important. You don't want to be hitting the gas when there's a wall in front of you. You want to make sure you are able to go all in when it's necessary. The second thing is, you gotta last. You can't just sprint all the time, no matter how athletic you are. You need to have some level of endurance. That's probably one of the things that I've really learned to do over the years. I wasn't great at it at the beginning, but now I'm probably pretty good at it. We're recording this on Monday; yesterday was Sunday. I recorded a podcast Sunday morning at 11 o'clock after I had a 2-hour meeting with a friend at 9 AM. A lot of people were like, "That sounds crazy," but I'm like, "No, what did you do? You 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. If you enjoy doing it, this isn't hard. I'm looking forward to talking to you two because I think it's going to be ridiculous, probably a lot of fun, and we're going to learn something from each other. How lucky are the three of us?

Shaan Puri

2 out of 3 ain't bad. So, let's... we gotta get to this crazy biology bet, and then I'm gonna ask you what you're doing with your life after that because I think you...

Sam Parr

well do do do do

Shaan Puri

do do do empire

Sam Parr

you have to set the stage for who he is right

Shaan Puri

Who is Pomp? Okay, so let's start with who Pomp is. I think you're known as the "Bitcoin guy." I would say that's kind of how you built your brand. You've obviously done a lot more than that. Before this, I think you worked at Facebook and even had a quick stint at Snapchat. You worked in tech and started to build a big following on Twitter around crypto and Bitcoin. You built one of the bigger newsletters and brands in that space. Since then, you've launched a bunch of businesses around it. You had your own VC fund or worked at a VC fund and launched your own. You also have a crypto jobs company and a bunch of other things in that ecosystem. I think you've made some changes now, so I want to hear about those in a bit. But first, we have this Balaji bet. Why don't you give us the quick 60 seconds on who Balaji is, and then we'll frame what this crazy bet is? I also have some inside info.

Anthony Pompliano

Alright, so I don't want to be a spokesperson for Balaji. Everything I say is my opinion. This is my description of him and this is my description of the bet. Balaji Srinivasan is probably best known now for being one of the more public figures to have predicted a lot of what happened with COVID. He was very early in calling out, "Hey, this is a risk. If this risk becomes a reality, here's how bad it could get." As with predictions, a lot of it was right and some of it was wrong. Generally, I think people look back and say, "Man, we should have listened 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. The internet kind of rallied around this idea that the worst words to ever hear were "Balaji was right." When you build that type of following and that type of reputation, people put a lot of weight on what you say. His latest prediction is that Bitcoin is going to hit $1,000,000 in the next 90 days, which sounds absolutely insane. Bitcoin's trading at $27,000, so we're looking at a 40x increase from here. To do it in 90 days is something we've never really seen an asset do before. Now, I don't agree that this is highly likely. I would put it at maybe a 5% chance, which is actually much higher than probably most people would estimate. But to me, the most interesting part is the reasoning behind why he's saying this. I think it's important to call out that 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 talk about the ideas of hyperinflation, bank failures, and Bitcoin. I think that's ultimately what he was trying to do. If you asked him in a private room, "Hey, do you really think Bitcoin's going to be a $1,000,000 in 90 days?" he's putting $2,000,000 on the line, so he definitely thinks there's a chance. But I don't know if he's at like 99.999% likely or if he's just trying to call attention to the issue.

Sam Parr

what's 2,000,000 to him is that a big deal or no

Anthony Pompliano

It's hard to tell. So, Blagi, before he became known as the "Blagi was right" guy, built and sold a number of companies. I think at least two that I know of had nine-figure exits. He's a great entrepreneur. He worked at Andreessen Horowitz for a while and was at Coinbase as the CTO. He's a very real entrepreneur and investor, and he's done well for himself financially. But like, I don't care how rich you are; you don't go publicly bet people $2,000,000 on Twitter unless you have some degree of confidence. Because in some way, $2,000,000 may or may not be a big number, but your personal reputation is, you know, "priceless." So, that's basically what staking here is. He's using the money to draw attention 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.

Sam Parr

And the bet started because this guy, Metlock—I actually don't know his first name—but he basically tweeted something and said, "Hyperinflation is not going to happen." Then, Bology replied and said, "I actually think it will happen. In fact, I'll bet—I’ll take your $1,000,000 bet that hyperinflation is going to happen in the next 90 days." This is related to Bitcoin, or that's another bet on top of the Bitcoin one. Then you wrote this post, and you had one line—actually, a couple of lines in there—that I hated. By "hated," I mean it stung me. One of them was you quoted Lenin, you know, 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. I started reading this, and I got scared. I was legitimately scared. I texted you and I was like, "Is this real?" And you're like, "Maybe, maybe not." I forget exactly what you said, but you wrote this in such a way that I was fearful.

Anthony Pompliano

Yeah, so I definitely don't want to fear monger, but I do think that there have been two points now in the last three years where it's like, kind of a shake to people and wake them up. It's like, "Hey, pay attention right now." The first was during March of 2020. I wrote a couple of different pieces, and people had similar reactions to it. One of the pieces was basically arguing that unemployment was going to be in double digits and millions and millions of people were going to lose their jobs. I had people privately emailing me, saying, "You are insane! Please stop fear mongering; this is crazy." Then the next week, 6,600,000 people filed unemployment claims. So, if Bellaghi is like a +, I'm like a - maybe in analyzing some of this stuff. But at least what I want to do is call attention to the fact that, "Hey, this is serious, and you should pay attention." Because if this goes the wrong way, it could be catastrophic, not only for people's personal finances but also as a nation. I think it's also important to call out that, yes, it is important, but I don't think most people want this stuff to happen. The United States of America is this amazing place. There are millions of people around the world who try to come to this country, and it's because we have democracy, capitalism, stability, and all the things that we know make this country great. If we were to lose some of that stuff, 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; they want guns. And that's not a world we want to live in. So, I think it's less about finance and investing, and much more about paying attention to this serious situation that's playing out. I think that's what Blasji is doing with his bet, and that's what I tried to get across with the piece that I wrote last week.

Sam Parr

You also had this other line where you said, "Bodies keep floating," or you said a friend yesterday told you, "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. You used a language that stung me. I have a high-level understanding of this stuff, but I'm nowhere close to a lot of smart people. When I see people 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 not the guy who does this. They're so convincing because they're such good writers and so good at just explaining their points that I have to remember that when I read a Malcolm Gladwell book, it's like, "Dude, this is all just a theory." 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 begin to believe you. I have to pinch myself sometimes, like, "Wait, this is just his opinion," and there are actually people who are probably equally smart and equally experienced that have a different opinion. I find that whole thing to be very confusing and unsettling.

Anthony Pompliano

It's this viewpoint that you want to argue ferociously for 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, "Whatever, I've heard this a hundred times," then nobody even takes the time to respond. But on the internet, you kind of have to go all in and really argue. If you are intelligent, hopefully, if you get new information or you see a critique that you're like, "Oh, that's actually great," 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: to just argue ferociously. Then you'll get the ferocious response, and that will help you get to the truth faster.

Sam Parr

What's the best... Let me ask you a question about this, Sean, really quick. What's the best argument, as well as the best person, that you like to read who takes the opposite stance of you? Who do you think, if I'm wrong, could be right? Who do you like to read that thinks you're wrong?

Anthony Pompliano

So, it's different on every topic, obviously, and even in individual situations. I have friends with whom I agree on 95% of things, and then there's that one thing that they vehemently disagree with me on. I actually pay attention more when they disagree than to the person who disagrees with everything. It's like once somebody has shown that they're a clear thinker and is able to actually think through individual ideas, they don't just succumb to, "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 want to surround myself with people who are very clear when they agree and very clear when they disagree. What you want to look for is volatility in agreement. The more that somebody agrees with you, the more you should pay attention and put weight on when they disagree. Conversely, the more that somebody disagrees with you, you want to pay attention when they actually agree. So, it's that volatility or that kind of reversion away from the mean that ends up being important to pay attention to.

Sam Parr

but who who who who are those people in this case is there anyone

Anthony Pompliano

Right now, I would say it's less about individuals. I think there's a whole cohort of people; everyone has kind of a little bit different view. But let me explain first what's happening, and then it'll help me explain why I think there could be a counterargument to it as well. So, the main argument is that if you go back to the beginning of 2020, the economic and financial system was pretty good. Unemployment was low, inflation was under 2%, and we were kind of chugging along. We've been in a decades-long bull market; everything seemed fine, if not good. Obviously, COVID happens, and the first big shock to the system was all the government lockdowns. 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. If you used to go to the bar or buy stuff at the store, now you're just locked in your house and not spending as much money. So, when the velocity of money goes down, people get scared. When they get scared and they're fearful, there ends up being something called a liquidity crisis. The best way to think of a liquidity crisis is just like this: you look at your portfolio of assets and you're like, "I want dollars. I want safety." So, you just sell everything that you can to try to get dollars. People didn't care if it was stocks, bonds, cryptocurrency, or if they had liquid real estate assets they could sell. They just sold everything and wanted dollars. If you go back and look in March of...

Sam Parr

literally meaning cash in a checking or savings account

Anthony Pompliano

so that's like step 1 and then if you remember during march april of 2020 people didn't know what's going on like I went to the atm and I pulled out a bunch of cash if you were literally pulling physical cash out 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 because fear takes over and so when these liquidity crises happen 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 kinda 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 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 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 1,000,000,000,000 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 $1200 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 $60,000,000,000 of deposits to start they ended up having about a $190,000,000,000 of deposits so kinda three x growth $130,000,000,000 or so but what does the bank do when all of a sudden people show up and like here's a $190,000,000,000 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 0 so instead what silicon valley bank did is they went and they bought 10 year bonds meaning that they're gonna buy a bond today if they hold it for 10 years they'll get back their principal + 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 + the the 1.5% type return over that 10 year.

Sam Parr

Which is a conservative play

Anthony Pompliano

Super safe, super conservative, backed by the U.S. government. Everyone looks at treasuries and thinks, "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, and inflation exploded. We had the highest inflation in 40 years. Now, all of a sudden, inflation's at over 9%, and the central bank's like, "Oh boy, this is not good. We have to bring inflation down." Inflation actually doesn't hurt rich people; they make money on inflation because they own assets. It's the poor people, the bottom 50%, who are the ones that get hurt by inflation. So, let's try to get inflation under control. The way they did this is by jacking up interest rates from 0% to about 4.5%. 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 and spend money.

Sam Parr

what did they sell what did they sell

Anthony Pompliano

the central bank this is actually a crazy statistic they had about a $900,000,000,000 balance sheet coming out of the global financial crisis they 10 bagged it they literally went from 900,000,000,000 to 9,000,000,000,000 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 to pull liquidity out of 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 $130,000,000,000 80,000,000,000 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 a half% that bond that you bought previously is no longer good it's actually cheap and so it trades lower so if you spend a $100 on the bond now if you were to sell it to someone maybe you could sell it for 80¢ 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 he bought a stock and he spent a $100 a share right so he's he bought a stock for a $100 if he goes to the bank and now the stock is trading at $80 and he wants to use that stock share as collateral they don't give him credit for spending a $100 they're like hey moron it's worth $80 like you get credit for $80 not a 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.

Anthony Pompliano

And they'll get the principal plus the return. 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 this does not work is if all of the depositors want their money back at the same time. Because then the banks have to sell all those assets and take that money to give back to depositors. That's what happened to Silicon Valley Bank. Basically, there was a bank run. When the bank run occurred, it caused the bank to sell assets, and they lost $1,000,000,000. This then scared more depositors, so they went and said, "Hey, give me my money back." It just became this reinforcing cycle. In 24 hours, $42,000,000,000 was drained out of the bank, which caused them to eventually be insolvent, and the government took it over.

Sam Parr

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

Anthony Pompliano

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 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 or just tech banks this is a complete global financial 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's 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 1,000,000,000,000 and 1,000,000,000,000 of dollars to do it and so at the same time you're getting 1,000,000,000,000 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 kinda 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're 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 2 is like you come 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 kinda how to prepare for it I can't find this client info

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Shaan Puri

so let me add a little color on on what you just said so there was a balaji tweeted this out it was just a an like a memo or a note from the kansas city office of the federal federal reserve and they had said there's kind of this like one section that he highlighted which it said at year end 2021 so basically 2 years ago only 4 community banks were below the kind of 5% ratio of 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 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 gonna 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 33133 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 overseas because the the dollar is the the the reserve currency overseas there's a bunch of banks that hold dollars and they're they're worried about what if there's a bank run on us 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 where they're like oh we're we're establishing this like swap line and I was 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 gonna get hit with a run we don't want you to fall over and cause this cascade of fear and panic and and withdrawals so we will also backstop you just like we backstopped you know the community banks in the united states so that's to to balaji's credit I think he has correctly identified just like he did with coronavirus that hey this might be a lot worse than you think 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 v one of of trying to spread the word sam I don't know if you saw this one so the first v one 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 a $1,000,000 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 and the banks and the big regulators have bankrupted us they're trying to hide the insolvency of the banks to you the depositor

Sam Parr

Which is a weird thing to do, right? That's like, it's helpful that he's trying to help, but sometimes that doesn't help, right?

Shaan Puri

This was a pure giveaway, right? This is not a bet. He said, "I'm giving away $1,000,000. I'll give $1,000 to the 1,000 best tweets that will spread the word." This tweet did pretty good, with 13,000 likes. He tried, but then he hits you with just a bunch of, like, you know, things that topology is like light reading. But to the rest of us, it's like, "Oh man, I gotta hook up to an oxygen tank just to intake this amount of information." So it's this crazy thing. 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 data points, but it wasn't really going viral until this guy, James Medlock, comes out and he goes, "I'll bet anyone a $1,000,000 the U.S. does not enter hyperinflation." And James Medlock by...

Sam Parr

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, is within 90 days of like last week, right?

Shaan Puri

No, no. First, it was James Bradley who just said, "I'll bet anyone high, high $1,000,000 hyperinflation doesn't happen." Okay, that was just that guy's tweet. Apology just takes this random by.

Sam Parr

the way I I interrupted you say who he is say who he is

Shaan Puri

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

Anthony Pompliano

meme worthy it's $1,000,000 bets

Shaan Puri

yeah exactly you'll hit you'll hit his guy email is at atmastodon.l0l 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 1 bitcoin and I'll I'll send $1,000,000 to an escrow to be clear this is 40 to 1 odd so he's basically saying not only is this unlikely to happen like if this was even odds it would have been like dang ball is just gonna lose $1,000,000 because bit bitcoin's not likely to be worth $1,000,000 then he added in 90 days which is already a radical move then he said and by the way the $1,000,000 versus 1 bitcoin bitcoin's currently at 26,000 at the at the time you made the spend he goes that's 40 to 1 odds that I'm laying you and he says all we gotta do is find you know a mutually agreed on like escrow or custodian 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 11,000,000 views because it's more provocative it's it lets anybody and at at first the wave of tweets myself included was like apologies nuts he's gone crazy like this doesn't make any sense and and so you know because it was like not only was the bet unlikely to prove in his favor it was a perfect bet for mister 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 and the dollar does hyperinflate bitcoin becomes worth $1,000,000 all he had to do was buy a second one so if he could for $52,000 he could guarantee himself a $1,000,000 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 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 because it's not 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 people think this was a silly single bank issue like silicon valley bank it was a central bank issue all the banks are dead 10 day days ago there were no dead banks today there are 5 and if people realize this and they'll put they'll start to pull their money out they'll realize that the banks don't have it it's uncle sam bankman freed not uncle sam 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 you know the the extreme crash and then he tweeted out a bunch of stuff and he goes he goes I'm not doing he goes yes I'm not doing this to make money because 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 $1,000,000 and buy 40 bitcoin I'll take you know another $1,000,000 buy another 40 bitcoin and I do it quietly because I believe that the us that that the $1,000,000 is gonna be worth 0 in 90 days I'm doing this to alert innocent people and to send a message get to the exits and so I wanna bring up a couple of like cases here so that that's the bad

Sam Parr

Hold on, really, really quick. There was also this other thing. Apparently, right around this time, there's a picture of him. So this guy, Balaji, he has this like...

Shaan Puri

stereotype the picture on the youtube video you gotta throw the picture

Sam Parr

So, he's got this stereotype of being, you know, like the forgetful scientist. He's just this guy who only cares about being brilliant, and oftentimes he's right and he's eloquent. There's a picture of him that looks like he's giving a seminar at a university. Someone tweeted, "Balaji's saying get the f*** out of the US," and it's very scary. He's sitting there giving this presentation in front of 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 two cardboard boxes. So, if you needed any more of this stereotype of this brilliant, you know, image that we have of Mark Zuckerberg—just sitting in a hoodie, coding, eating pizza, and drinking Red Bull—Balaji's going all in on that image. It almost makes it worse when I see this picture.

Anthony Pompliano

But I think a lot of why he has so much credibility is that he has been able to identify a number of these exponential situations. If you really think about what he's saying here, it's almost an exact overlay to COVID. He saw very early on a couple of data points and he was able to extrapolate from those data points. "Hey, this isn't a linear line; this is literally an exponential curve." The top of the exponential curve is really scary. Let me go yell, scream, and call attention to it. He's doing the exact same thing here. I think that's what Sean was reading about. Like, "Hey, 10 days ago there were no dead banks; now there are 5." He's just trying to put a couple of data points together and be like, "If this goes exponential, this is really bad." One of the components that's important to call out is that I don't know what the percentage is of Americans, but most Americans don't know that if you go and deposit your money in the bank, it's not your money anymore. Just that alone—the lack of financial education of the average American—is astonishing. Yes, there's FDIC insurance that covers up to $250,000. There are all these different things, but if you go look right now, the FDIC does not have enough money to backstop every bank in America.

Sam Parr

I think they used 20 or something I think the 20% of it was used to help silicon valley bank

Anthony Pompliano

yeah that's like

Sam Parr

A good idea bank. Yeah, Silicon Valley Bank is like the 20th largest bank in America. So it's not very big compared to the big, big ones.

Anthony Pompliano

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 kinda 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 $42,000,000,000 had been withdrawn from the bank and by friday morning the bank was dead right so like in 48 hours it was the 2nd 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 would be like that's kinda 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 so 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're 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 $42,000,000,000 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 2nd 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 bat the bag holders as the banks and so people were just operating out of personal incentive to get out of the way

Shaan Puri

Yeah, there's a... it was kind of amazing. Like Thursday morning, I remember waking up and in our group chat, Sam, there was like somebody posted that Silicon Valley Bank stock was going down. It was down like 30 or 40%. I thought, "Oh wow, must have had a bad earnings call," right? That was kind of my assumption. It wasn't anything too, too bad. You know, by 11 or noon, I'm scrolling Twitter and I start to see... you know, if you scroll through social media and you see 4 or 5 different sources talking about the same thing, your brain is just wired to be like, "This is now a big deal." Topic X is a big deal. Marketers use this to their advantage when they want you to, like, go buy a product or know about a movie that's coming out or whatever. They do the same thing. That's why influencer marketing is a big deal. But it also works just organically. If 5 people say the same thing in one Twitter scroll, I know that something's up. 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's like, "Let's just be safe, take it out." I sent an email saying, "Hey, we're taking it out." I 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 thing. It's like, wow, in 15 minutes, I just propagated this more than I could have done if it had been my full-time job, you know, 20 years ago, which is kind of what... to your...

Shaan Puri

And the funny thing is, people are mad. They're like, "Well, if there wasn't a bank run, there would have never been a problem." It's sort of like... they use this example of what it's called, like screaming "fire" in a movie theater or something. Then everybody runs to the exits. Well, the reality is, if there's no fire in the theater, everybody runs to the exits and gets stuck there, trying to get out. It's not that big of a deal if there was actually a fire. So, I don't know how the blame gets shifted to the people who successfully got out of the fire versus pointing out that, hey, somebody caused this thing to catch fire. This is kind of Balaji's point. He tweets out this graph of the balance sheet or whatever. It basically goes up, up, up, up, up, which is during the money printing era. Then, for the last year or so, it's been trying to tighten, so it's been going down, contracting. Then, overnight, it just goes straight up vertical—like no graph you've ever seen—because this $2,000,000,000,000 of liquidity was basically added to the market. Now, some people say, "No, it wasn't really put into the supply." You might have an idea about this. Some people say, "Well, that $2,000,000,000,000 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 to prevent any panic." Other people say, "Money for it to go bird, it's the same thing." So, you know, what are you talking about here? I don't know. Do you have an opinion on that?

Anthony Pompliano

You know when you're in high school and there's the "but actually" kid in class? They sit there in the corner, and no matter what anyone says, they respond with "but actually." They try to tell you about something they read or this or that, or whatever.

Sam Parr

It's actually called **Barthellona**. Exactly. Oh, you mean **bruschetta**? No, I mean **bruschetta character**.

Anthony Pompliano

like that is those people on the internet right these people who they're the same people during covid that were like but actually and then they would go on some rant right like no the government locked us in our homes and literally printed 1,000,000,000,000 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 as like they're 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 unreality 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 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 got to 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 kind of cycle or or or 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 19 fifties or sixties 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 the government or the fed or whatever on a daily basis there are things that are said by those who 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 kinda 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 2 generations ago they didn't have what are you gonna do go to the encyclopedia and look up like what does a bank run right or like how does central banking work it's just amazing that we now have this capability

Sam Parr

So, I think we should wrap this segment up. I want to conclude by having each of you, in just a couple of sentences, share what you think is going to happen in the next 90 days. Are you guys doing anything?

Anthony Pompliano

sean you go first okay

Shaan Puri

so I'm gonna say 2 things I think in the next 90 days I basically I think balaji is actually correct on everything except for his 90 day. Because I think that's too hard to know and he might end up being correct that if 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 is saying is a much louder better version of that which is for a long time people thought 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. The money that you have in the bank will still if you put a $100,000 in the bank it'll still look like a $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 would like you wouldn't do that and so I don't think that it's a 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 in 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 gonna inflate I've already been on this bandwagon obviously been the kind of crypto person that's 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 gonna.

Shaan Puri

Out that it didn't happen in that time. But in

Sam Parr

The next 900 days, I think that he will be proven correct in 30 seconds... or 60 seconds.

Anthony Pompliano

I think that Bellaghi 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. Mainly, it's because when hyperinflation happens, it happens very fast. Like in episodes of hyperinflation, everything's fine, and then 90 days later, there is hyperinflation. So it's less about "Has this ever happened?" and it's more about "Is it going to happen again?" I'm like maybe 5% because I do think there are very systematic 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 or save the dollar," will save the banks, which will lead to inflationary pressures. But I would not bet $1,000,000 that Bitcoin will be $1,000,000 in 90 days.

Sam Parr

whoo are you guys hyped up or what I'm ready to go get a fight

Shaan Puri

We should say... you mentioned one thing, which is the other take that people have on this. If Balaji has like $100,000,000 in Bitcoin, he doesn't need to be right for this to be a profitable bet for him. So, if he's got $100,000,000 in Bitcoin and Bitcoin's up like 20% last week or something like that, but it's up like 4 or 5% right now, he basically would only need it to move up by 3% in order for him to be profitable. Losing $2,000,000 USD if he's got $100,000,000 in Bitcoin, which I suspect he does. I think he has moved... I think he said this... he's moved 99% of his net worth into crypto. So, I don't think he can be directionally wrong. I think he can lose the bet and still make money while doing what he believes is the right thing to do, which is alerting people that the banking system is currently broken. He is the Michael Burry of our industry, so we'll see if he's correct.

Sam Parr

Dude, I just feel like I drank a liter of Mountain Dew. I'm just like drinking buckets of Dew. I love the brand, you know?

Shaan Puri

When Pompeo tweeted out that he's coming on, people wanted to know, "How are 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?"

Sam Parr

well hold on

Shaan Puri

In 51 minutes of hell, are you in on this? Are you going to go buy Bitcoin or what?

Sam Parr

I own bitcoin I own not

Shaan Puri

that I own it from 2015 as far as the no no no no no no no no

Sam Parr

I've made purchases and I don't have cash. I have real estate, but here's the thing: during hyperinflation periods, I own equities, and those also go up. To get to a $1,000,000 Bitcoin right now, which is at $27,000, 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.

Shaan Puri

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 the biggest Bitcoin bulls, would say this would be your self-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.