Daily Balajisms - BitSignal
The price of bitcoin is the most honest market signal of a desire to exit.
After two month break, I continue writing Daily Balajisms 5x a weak and producing Daily Balajisms podcast series with my good friend Duke Mtambo. So far, I have written 40 articles and together with Duke we have recorded 40 episodes discussing evergreen concepts and metal models of Balaji Srinivasan. Now we continue with new Balajisms related to the ongoing Financial Crisis 2.0 that Balaji calls the TradFi Winter or the Central Bank Crisis and Fiat Crisis.
BitSignal is the hashtag that Balaji Srinivasan used to start his twitter storm about the financial crisis that started with the fall of Silvergate Bank and Silicon Valley Bank. Balaji radically reframed the issue very early on, into a systemic problem of many insolvent banks (“Fed lied, banks died”), not just tech bros and crypto bros taking on too much risk.
Balaji with his BitSignal meme is referring to Peter Thiel’s quotes from 2021 that “bitcoin is the canary in the coal mine” and “the most honest market we have in the country, and it’s telling us that this decrepit regime is just about to blow up.”
Finance as a sector is very often zero-sum and therefore it evolved for opacity, says Balaji. When people feel stupid that they don’t understand every technical issue about modern finance, this is due to the opaque instruments and technical language that evolved in a complex system – people and institutions that were too obvious with their tricks were eliminated by the evolutionary competition. Now the rug-pull is hidden in fine print and footnotes.
With BitSignal, Balaji sounded the alarm that “money is gone” and people should exit fiat for bitcoin – “buy bitcoin still when you can and get it off exchanges”. This is a technical defense in the current financial crisis. And a social defense is to move to bitcoin-friendly and crypto-friendly jurisdiction – within the US or even better abroad.
Balaji thinks that moving money from small US banks to large and systematically important ones (G-SIBs) or money market funds is a dead end and a mistake. Because the US will monetize its debt and close people in a devalued dollar system.
The authorities are going systematically after crypto, thinks Balaji. A pro-crypto Silvergate Bank failure was connected to, what Nic Carter calls, Operation Choke Point 2.0 and started this current financial crisis. And this failure was surreally celebrated by senator Elizabeth Warren.
In an effort to destroy crypto, the US authorities might have nuked their banking sector and the whole fiat system.
Balaji thinks that the newly proposed RESTRICT Act is the American Great Firewall, where the US is trying to outcompete China in their digital authoritarianism. His BitSignal alarm is a call for people to get into the bitcoin life boat when they still can, before the fiat-to-crypto bridges are burned.
He put up a thousand-dollar prize for the best 1,000 memes, stats, and graphs illustrating the current predicament of the financial system that was whiplashed by Covid shortages, Covid stimulus, and inflation. We got supply chain disruptions and Americans got stimmy checks during Covid. Last year we got persistent and high inflation due to Russian invasion of Ukraine and this led Fed to drastically raise rates in 2022 – a postponed and politically motivated action after US elections.
But Balaji broke the internet with his million-dollar bet that bitcoin price will hit one million dollars within 90 days. Others, like Arthur Hayes, think that this will happen over a longer period of two to three years.
Balaji says he in a sense already won the bet – because it became a mainstream view, that the US banks have a systemic issue of (near) insolvency after they binged on US long-term bonds in 2021 and this broke throughout 2022.
I think Balaji is maybe one of the first examples we have of what I call an Overton whale. A person or a small team that can shift the Overton window and move the market of ideas – like a whale making a big splash in the noosphere.