| Let me explain: The reason opportunity cost matters is because he could have done something with the money, like buying bitcoin, instead of putting it up for a bet. Balaji claims to believe that Bitcoin will be worth $1 million dollars in 90 days. Also, Balaji has $1 million dollars in his bank account. In 90 days, we can pretend there are three outcomes for Bitcoin's value:
a. It's worth $1 million+
b. It's worth between 0 and $1 million
c. It's worth zero. If Balaji bought 37 bitcoins today with his $1 million, the value of his assets at the end of 90 days in those three scenarios would be:
a. Over $36 million
b. Between zero and $36 million.
c. Zero Instead, here are the outcomes under the bet he made:
a. $2 million
b. Zero
c. Zero Assuming he is being sincere in his belief, every other outcome in the price of bitcoin makes his bet suboptimal to just purchasing Bitcoin, outside of Bitcoin falling to zero, which is why it's been called a "sure loser" bet. |