A pseudonymous leftist Twitter account, @jdcmedlock, won a $1 million bet on US inflation against crypto investor Balaji Srinivasan. The account, supposedly linked to James Medlock, boasts over 83,000 followers and regularly tweets about economics, leading to the bet with Srinivasan in March. Medlock had tweeted that he would bet anyone $1 million that the US would not experience hyperinflation, prompting Srinivasan to accept the challenge with a 90-day term.
Bitcoin as an Inflation Hedge
The bet was not directly based on US hyperinflation but rather on the value of bitcoin, which Srinivasan views as an inflation hedge. He bet that bitcoin would be worth $1 million after 90 days, with its value increasing as inflation rose. However, as economics writer Noah Smith pointed out on his blog, Srinivasan did not seem to consider the possibility that bitcoin’s value could also be wiped out in a hyperinflationary environment.
Also Read: Former Coinbase CTO bets $1 million on Bitcoin hitting $1 million by June 17, 2023
Hyperinflation: A Distant Prospect
With the Federal Reserve focused on controlling prices and cooling the economy, hyperinflation was highly unlikely. Consequently, the bet was not in Srinivasan’s favor. Medlock told Quartz via email that hyperinflation is extremely rare and typically occurs during times of conflict or institutional collapse. Considering the US dollar’s status as the global reserve currency and the relative stability of US institutions, hyperinflation today would be unprecedented.
The Bet’s Settlement and Plans for the Winnings
Although the bet was set on March 17, it was settled early. Srinivasan did not immediately respond to a request for comment on why he paid out before the 90-day term ended. However, in a blog post, he wrote that he spent his own money to send a provably costly signal about the economy’s issues, suggesting a potential fiat crisis. Medlock, a self-proclaimed “tax enthusiast,” plans to pay an effective tax rate of 70%. While taxes on the winnings will amount to $240,000, Medlock has already donated $500,000 to GiveDirectly, a poverty charity. Srinivasan also donated an additional $500,000 to bitcoin core developers, bringing the bet’s total value to $1.5 million. Medlock intends to use the remaining winnings to pay off debt, build a cat house for a neighborhood feral, and invest in low-fee index funds.
