Euro Pacific Capital CEO Peter Schiff is a businessman, former US Sentate canditate, an outspoken critic of Bitcoin – and he’s completely wrong.
Not that Bitcoin is perfect, mind you – there’s plenty to criticise in what is still a developing project to completely reinvent money and financial independence as we know it. However, Schiff’s specific arguments don’t carry much weight.
An appearance on Joe Rogan’s podcast last year showed some fundamental misunderstandings of the cryptocurrency from the outset with Schiff arguing that Bitcoin is a bubble doomed to failure like the early internet venture Pets.com, or the Dutch Tulip Bubble of the 1600s.
Schiff stated his belief that “Bitcoin mania” is based on the notion that Bitcoin will be widely used as a frm of currency in the future, and went on to compare the belief to a cult mentality.
Ironically, Schiff is an advocate of the use of gold and even owns a company called SchiffGold that buys and sells the precious metal.
As pointed out in a Forbes article, Schiff seems to have one standard for gold and anothe for Bitcoin despite the similarities in the reasons for buying and holding both commodities.
“It should be noted that the belief that gold will become a more widely-used form of money is also a huge part of the basis of Schiff’s reasoning for buying and holding the precious metal. Critics of gold bugs have often made the same argument Schiff is making against bitcoin here — but instead aimed at the gold market.”
Schiff also said that cryptocurrencies had no inherent value, and depended only on the value given to them by the community. This, of course, is true of any currency. The US dollar is unbacked by any commodity and has value simply because the value is mutually agreed upon, and while gold has a function as a conductor of electricity and applications in dentistry, the value of an ounce of gold does not reflect those use cases but rather the notion that gold is inherently valuable, which is arguably ass cult-like as Schiff’s idea of Bitcoin.
Comparing Bitcoin to gold in terms of supply, Schiff told Rogan that the supply should have no effect on the price action, which simply isn’t the case.
“They think ‘oh, there’s twenty-one million Bitcoins’, and they think that that means they’re scarce. Well, they’re not scarce, there’s so many other currencies out there, and it’s only scarce because… it’s coded to be scarce. Gold is scarce because it really is scarce.”
Bitcoin is recognised as a commodity by the SEC and whether the scarcity is artificially imposed or not, it exists. There is a finite amount of Bitcoin, and the code is secured in the most widely distributed blockchain network in the world. It’s a scarce commodity, and as with all commodities, the scarcity influences the price action.
Gold is arguably far less scarce than Bitcoin, mined for thousands of years and with new underground ore deposits found all the time. Space exploration could reveal huge amounts of gold off-world at some point in the future as well, but Bitcoin is programmed to a set number and the programming will not change.
“The only thing I can do with my bitcoin is give it to somebody else”
This is my personal favourite. That’s prety much the idea of currency, isn’t it? To be used, among othe things, as a medium of exchange? The only thing you can do with the US dollar is give it to someone else in exchange for goods and services. While Schiff argues that the US dollar has a form of forced backing in tax payments, meaning that US citizens are forced to engage with the currency in order to fulfill their civic duties, there are also darnket transactions that can only be carried out with Bitcoin.
This all boils down to the inherent value placed in the currency. Bitcoin is a valued commodity simply because people agree that it’s valuable. While the value is unstable, as Schiff correctly points out, at some point it’s bound to level off. Until then it has a use case both as an online digital currency and a speculative commodity.
From Forbes:
“This gets to a common theme in Schiff’s arguments against bitcoin where they can almost always also be applied to gold. Sometimes the argument applies even more harshly to gold. After all, how many online merchants accept gold payments?”
While an argument could easily be madethat Schiff is simply shilling gold and trying to badmouth what he sees as the “competition” for a true global currency, he strikes me personally as sincere in his views.
His father was a tax protester who lost multiple court cases against the US government arguing that the US Tax Court is not a real court and that IRS taxation was unconstitutional.
He sentenced to 13 years, and wrote a book called The Federal Mafia while incarcerated – he died in prison at age 87.
Schiff followed in his fathers footsteps in certain regards, insisting that the US dollar is going to collapse and that people should have their own government-secularised currency to prepare for that eventuality. It makes sense that he would view Bitcoin as a threat to the status of gold in his mind, which explains why he has been an outspoken Bitcoin critic for years.
Perhaps he is a shill mindfully trying to do damage to the public perception of Bitcoin regardless of whether it has a greater use case as a global currency than gold, and perhaps his heart is in the right place and he genuinely believes his critique of Bitcoin and its many failings.
Either way, the arguments he makes against the cryptocurrency are fundamentally flawed, misinformed, and blinkered to the fact that apply to gold just as well or better in some cases. His persistence in slamming Bitcoin does, if nothing else, raise the interesting question of whether gold and Bitcoin can both co-exist and cater to different needs without an overlap leading to competition between the two commodities – the old and the new.
Remember folks, Crypto is comin!
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Interested in other cool crypto posts….check out Uncorrelated assets, the “holy grail” of portfolio allocation.and The Price of Bitcoin vs Cost of Mining.
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