Geopolitics and Markets Review – 20th March 2023

Crypto Bets, UBS, and ICC Want Putin Arrest

Balaji’s Big Bet

Bitcoin to $1 million? A 3471.43% increase from today’s price of around $28,000. The best take I’ve seen came from Miles Deutscher who doesn’t agree with Balaji’s theory. But the main aim of the bet was to garner attention and support for the hyperbitcoinization idea. This evidently has worked, with many rushing to take the other side of the deal that $BTC won’t hit $1 million before June 17th. And the $BTC price rose almost 17% last week. A liquidity-fueled momentum asset most of the time, the $BTC price rising demonstrates that as the banking crisis continues, the privacy and control individuals have over $BTC is incentivising these inflows.

Further criticism of the bet came from Nassim Taleb due to Balaji’s reasoning. Balaji believes that the rapid devaluation of the dollar will cause the rush of $BTC to $1 million. It also provides an excellent arbitrage opportunity for the counterparty in the bet. Arbitrage is risk-free profit.

In short, if the counterparty buys two $BTC, if the price is above $1 million, they would send Balaji one $BTC, but would still profit from the other $BTC.

If $BTC isn’t above $1 million, they will profit from the $1 million bet by Balaji and will still get to keep both $BTC they bought before the bet.

Nassim Nicholas Taleb @nntaleb

Most disturbing finance error: many like the lunatic Balaji mistake the forward for the expectation of future spot. It's not and we've known since 1923 that Forward-Spot is simply a mechanistic cash and carry arbitrage relationship. You learn that in undergrad finance 101.

Balaji Srinivasan is a former Coinbase CTO, and in October he was featured on the Lex Fridman Podcast in an episode that was over 7 hours long. It was a fascinating conversation if anybody has a spare 7 hours as I did at the time. He is a very intelligent guy, which further supports the theory that this is a marketing stunt to gain momentum in the $BTC price.

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UBS Deal For Credit Suisse

UBS has swept in like a knight in shining armour to save Credit Suisse, the bank in distress. UBS paid $3bn to buy their rival Credit Suisse. This morning saw stock markets in Europe start down, with many of my index trades hitting their take profit points. They later recovered with most indices up apart from the NASDAQ.