Peter Schiff is the most famous bull on gold. He’s also a believer that Bitcoin is doomed to fail. The question is, why? To answer this, we must remember where things were in 2013 and what was happening in the crypto markets back then.
In this article, I’ll take you through my analysis of Schiff’s thinking (which leads me to believe he had a good point), discuss why it matters now more than ever before, and offer some advice for how to invest smartly with or without Schiff’s guidance.
Peter Schiff is a famous gold bull
Peter Schiff is a famous gold bug and critic of Bitcoin. He has been a long-time gold investor, and he has been bearish on Bitcoin since 2013. He’s one of the most well-known bears on the cryptocurrency market.
That shouldn’t be a surprise if you’ve been following his career. His firm Euro Pacific Capital is named after his book Fool’s Gold: How Unstable Currency Is Destroying The Global Economy (which makes for an intriguing read!).
Schiff became more vocal about Bitcoin after it declined from its 2017 peak price of nearly $20,000 to below $4,000. It has resulted in some interesting comments regarding cryptocurrency, even though you can ignore most of them. Any adult can make sensible investment decisions.
Peter Schiff soured on Bitcoin in 2013
He sold all his crypto holdings and turned bearish on it. Even today, he believes that Bitcoin is not a currency but a speculative investment product. Moreover, he continues to harp on how gold is the only viable store of value accessible to investors today.
Schiff’s reasons for turning bearish on Bitcoin do make sense.
Cryptocurrency is not a good store of value because its price is too volatile. You can’t hold on to it for long periods without losing money. Schiff isn’t wrong there, even if the situation isn’t as black-and-white. It all comes down to expectation and risk appetite.
Secondly, he says bitcoin isn’t a suitable medium of exchange because there are only a few places where people accept payments in BTC. That is true, although things continue to improve every year.
Third, one has to go through several steps before buying anything with Bitcoin. Convert your fiat currency into BTC and then use it to pay someone else who accepts crypto as a payment method. This process could take days depending on how fast the transaction gets confirmed by miners, which makes it completely impractical as a medium of exchange. Assuming you include a standard network fee, the transaction will be confirmed by miners in under an hour.
Lastly, this point drove home with me–Schiff said that Bitcoin is not even close to being an effective unit of account because no one knows what 1 BTC should be worth. Nor does anyone know how many dollars or euros would equal 1 BTC when converted back into fiat currency after spending unless doing so immediately.
Peter Schiff sees it as only a speculative investment
You may have heard that Schiff’s primary objection to Bitcoin is that it’s not backed by a physical commodity like gold or silver. Unfortunately, this is true—and as such, Schiff sees Bitcoin as only a speculative investment product, not a currency.
However, when you consider the other aspects of what makes up money (store of value, medium of exchange), there are good reasons why many people view Bitcoin as an alternative currency:
- It has the characteristics of both store of value and a medium of exchange:
- It has a limited supply and can’t be counterfeited like fiat currencies.
- Holders can use it for purchases in person or online if merchants accept it.
Bitcoin doesn’t offer the same upside potential as gold
So let’s say you’re a Bitcoin investor and want to get rich quickly. If that is your goal, you are probably going to be disappointed. Most experts agree that Bitcoin is not an investment for those looking for quick returns on their money. That makes sense, considering how volatile its value has been over the past few years. Peter Schiff regularly describes the volatility on Twitter and how futile it is to expect anything different from Bitcoin.
Now compare this with gold. According to an older Reuters article by Daniela Hernandez: “The precious metal has outperformed every currency tracked by Bloomberg except for the U.S dollar since 2010.” So if you’re looking for an asset class that retains value while experiencing relatively low volatility over time, then perhaps investing in physical gold will give you better results than buying cryptocurrencies like Bitcoin or Ethereum.
Being a medium of exchange hurts its value as a store of wealth
I’ve already explained why Peter Schiff doesn’t think Bitcoin is a good store of value. But I didn’t get into details about why he thinks it’s not a suitable medium of exchange, so let’s talk about that now.
Schiff believes that Bitcoin’s volatility makes it terrible as a medium of exchange.
Let me explain: if you want to buy something with Bitcoin and the price has gone up or down significantly since you bought it, you’ll lose money on the transaction. And if people are afraid they’ll lose money by using their Bitcoins in transactions, they won’t use them at all. That means Bitcoin can’t be used as a currency in practice!
Peter Schiff believes that Bitcoin can’t replace gold and is ultimately doomed to fail
Schiff is known for his bullish views on gold. The investment advisor and economist has been predicting a significant uptrend in the price of gold since 2001, which makes him one of the most vocal analysts on Wall Street.
However, his views on Bitcoin are often a bit shortsighted. Comparing Bitcoin to gold is like comparing a pear to a pineapple. There may be minor similarities, but they are entirely different things. The world has never seen anything like Bitcoin, nor will it ever see anything like gold again.
One reason why Schiff turned into such an ardent opponent of cryptocurrencies was that he believed that they couldn’t replace gold. Instead, it will lead to another bubble burst similar to what happened in 2008 when governments bailed out banks instead of being allowed to go bankrupt.
We hope you enjoyed this article and learned some interesting facts about one of the most popular cryptocurrencies.
It’s clear that Peter Schiff still has strong feelings about Bitcoin and how governments should regulate it, but we think he’s missing out on some significant opportunities here!
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