Former Coinbase CTO says current financial crisis similar to 2008
Balaji Srinivasan, the former Coinbase chief technology officer (CTO), is opposing Jerome Powell’s “soft landing” statement and compares the current financial crisis with that of 2008. Powell is the chairperson of the Federal Reserve (Fed).
This comes a day after Balaji canceled his $1m bitcoin (BTC) bet and donated $1.5m to charity in compensation payments.
Balaji disputes Powell’s soft landing theory
Balaji disputed Powell’s soft landing statement that a recession is much better than an economic downturn, saying that the current financial crisis mirrors that of 2008
The move comes a day after the former Coinbase CTO canceled his bet on BTC after it failed to reach $1m in 90 days.
Balaji also gave $1.5m as compensation payment to three groups, including GiveDirectly, a charitable organization; Medlock, who had wagered against him; and the Bitcoin Core development.
The former CTO said he backed out of the bet because the economy was somehow broken. Moreover, he added that there are no special economic circumstances due to the lack of confidence in the United States government.
He made his prediction in the wake of the concurrent bank failures of Silvergate Bank, Silicon Valley Bank (SVB), and Signature Bank in March.
Balaji forecasted that the USD would sharply depreciate and that hyperinflation would send the BTC price skyrocketing to $1m in three months.
Recent bank failures compare to the 2008 financial crisis
Just like in 2023, the Fed raised interest rates from 2004 to 2006, which caused the housing bubble to burst in 2007. Notably, the collapse of Bear Stearns in April 2008 and the fall of Lehman in September 2008 marked the beginning of the Global Financial Crisis (GFC).
The Fed raised rates before SVB had a bank run in mid-March. Since then, other regional banks have failed, questioning the robustness of the United States banking system.
Specifically, the number of bank failures in the past six weeks, excluding PAWC and other regional banks on the verge of collapse, exceeds those that failed during the GFC.