🚨 Is this the next 'Big Short'?

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GM everyone. This is 2036, the crypto newsletter that pays you 💸

If you’ve seen ‘The Big Short’, you might have heard of Michael Burry.

He’s a famous investor who made a fortune predicting and profiting from the financial crisis of 2008 by betting on the collapse of subprime mortgages.

Over an 8-year period where the stock market returned a total of just 3%, Michael earned a cool 489%. He made $800 million.

Here’s Michael in real life, by the way:

Today, another genius investor is being ridiculed by his peers for a hugely contrarian view.

Is it time for ‘The Big Short 2’?

Let’s dig in.

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In 2020, the world shut down, and the global economy came to a halt.

To stimulate the economy back to life, central bankers printed trillions of dollars.

This worked for a while. But when more money is chasing the same amount of goods for too long, prices go up.

So we got inflation.

But too much inflation is bad. The Federal Reserve’s mandate is to keep inflation at about 2% per year.

So to fight inflation, the US central bank reversed course and raised interest rates at the fastest pace in 50 years.

But what happens when you do something no one has done in 50 years to deliberately slow down the economy?

Something breaks.

People had all sorts of theories about what was going to break. The bond market. Equities. Crypto. Real estate. My new shiny chopsticks.

But this time, it was the banks.

Remember, banks make money by taking your deposits and “investing” them.

But as interest rates increased to 4-5%, the banks didn’t follow suit. You’re not getting 5% interest on your deposit at the bank.

So people started withdrawing money from banks to invest directly in assets that actually benefited from higher interest rates - like treasuries, CDs, money market funds, etc.

To pay back the depositors, the banks had to sell what their deposits were invested in.

But these investments - a particular type of bonds - collapsed in value as interest rates went from 0 to 5%.

So the banks didn’t have the money to pay depositors. People panicked.

The central bank stepped in and said - “we’re gonna cover all your deposits. Everyone is safe.”

But that didn’t solve the actual problems: 

• Banks aren’t giving you any higher returns on your money. You’ll still leave. Now you might just do it more slowly.

• Banks are still saddled with hundreds of billions of dollars of unrealized losses

In short, banks aren’t making any money, and interest rates are too high.

So what’s the solution to all this?

To massively cut interest rates and print trillions of dollars to save the banks.

Ray Dalio, one of the most successful investors in history, expects interest rates to be cut within 6 to 9 months.

But the money printing has already started.

The Federal Reserve has already reversed 2/3 of the tightening it did over the last two years:

And Balaji Srinivasan - ‘Einstein if he had the Internet’ - expects trillions more to be printed over the next 90 days.

As a result, he thinks the price of bitcoin could reach $1M.

Why is that?

Because any increase in the central bank balance sheet is a debasement of the underlying currency.

This means the value of assets goes up.

In fact, asset prices are 97% correlated with the increase in balance sheets of central banks.

By and large, if the central bank balance sheet goes up 5%, stocks go up 10%.

So could bitcoin hit $1M in 90 days?

If hyperinflation in the US does happen, it would be a big short on the dollar.

Assets would win big. And bitcoin has a history of outperforming.

The last time we saw this kind of reversal by the Federal Reserve - in December 2018 - in just 6 months…

• bitcoin was up 300%

• growth stocks were up 30%

• the NASDAQ was up 20%

• the S&P was up 15%

And the scale of the current crisis is magnitudes bigger. So it’s possible.

Now - it’s important not to get caught up in the hype. We’re not cheerleaders here.

But Balaji is highly intelligent and has an impressive track record - just like Michael Burry.

We’re not holding our breath for $1M bitcoin within 90 days - but we’re prepared for it, just in case.

Because last time Balaji made a prediction was in JANUARY 2020, before most people even knew COVID existed:

We’ll let you make your own decision.

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