What happens If 1 BTC = $1M?
If you did not hear about the craziest bet in human history, Balajis (investor and former CTO of Coinbase) placed a 2 MILLION DOLLARS bet that each Bitcoin would be worth 1 Million USD in 90 days from when the bet was placed. At the date of writing, the price of one Bitcoin is ~$30,000, the value of BTC would have to increase by 33333% in such a short amount of time for this to happen. Now the reason that Balajis thinks this will happen is due to the devaluation of the American Dollar and many investors and cash holders fleeing to cryptocurrency assets and most importantly the decentralized-gold Bitcoin.
There are a lot of articles and blog posts detailing exactly why Balajis did this bet, and whether it is a marketing ploy or not, so this won’t be the main focus of this post. Let us focus on the scenario that Bitcoin does reach the million dollar mark, what happens next? Chaos ensues? Financial markets and transactions are changed forever? Let us dive a bit deeper.
New Era Of Millionaires?
The first topic that most people think about is the amount of wealth that would be “created”. If someone held 10,000 BTC then their net worth would be valued at $10 Billion. The concept that most people do not think about is that the jump to $1M is not instant, and no wealth can be actually “created”. Bitcoin would have to increase gradually from its current value to the top and through this process there would be a lot of buyers and even more sellers. Most people would be incentivized to sell their Bitcoin at a 100% or 200% profit rather than holding for longer and fearing that Bitcoin false back down and their unrealized profits are completely erased.
This is the same FOMO that altcoins investors face. When Dogecoin did a 500x from its initial coin offering price, most wished that they were able to buy at the low and sell at the peak of the graph, but in reality most would have sold at much lower prices and the people that do hold for so long are possibly 0.1% of the total population sample.
We laugh at this tweet now, but this is the reality that occurs with 99.9% of traders.
New Rules of Finance
If Bitcoin does reach $1M, this also means one thing, money was not created from thin air and money moved from somewhere else. According to Balajis, this money would flock from banks with fractional banking showing to be a failure in the long run. Assuming this is true, then the rules of finance would be changing and in my opinion this is a great thing. Centralized third parties have shown steadily to be a point of failure in financial, privacy and security issues. For a more efficient and secure future, transparency is key. A future where you would be able to hold your own money and earn interest on it transparently is a future that bank runs cannot happen, hackers and scammers cannot run away that fast and corruption reduces immensely. I aim for this future, whether Bitcoin is $0 or $1M.
Balaji’s bet might be crazy, or not real, but it makes you think… How close is a decentralized future?
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