Peter Schiff, a well-known market pundit, is right about many things, such as the rising US public debt and the risks of the US dollar. To some extent, he is also right about gold, the biggest precious metal in the world. However, in my opinion, he is completely wrong about Bitcoin (BTC).
Schiff believes that Bitcoin will collapse
Peter Schiff is a popular figure in the financial services industry. He is the Chief Economist of Euro Pacific Asset Management, a financial services company that offers wealth and asset management. Schiff also runs Schiff Gold, a company that deals with gold and silver assets.
While I agree with Schiff about the monetary and fiscal challenges that the US faces, I disagree with him on his opinions on Bitcoin. He believes that BTC lacks any value and its price will ultimately collapse.
This view is partly because he has a vested interest in ensuring that Bitcoin collapses since he is in the gold business. As I wrote recently, many people, including Michael Saylor, believe that Bitcoin is a digital version of gold.
The reality is that Bitcoin has evolved to become a real financial asset in the past decade. It has done this while facing significant criticism from well-known experts like Warren Buffett, Charlie Munger, and Jamie Dimon, the CEO of JP Morgan. Watch here: https://www.youtube.com/embed/J6sEcFYQh_o?feature=oembed
High interest rates environment
Bitcoin has proven most experts wrong for more than a decade. A common argument was that it would collapse if interest rates jumped. Well, rates have risen from near zero in 2022 to 5.50%, the highest point in over 22 years.
Sure, Bitcoin is still below its all-time high of near $67,000. It is not alone as the Nasdaq 100 index has dropped by over 8% from its all-time high. Tesla is down by almost 50% from its all-time high.
Another argument was that Bitcoin would plunge in case of a major black swan event. In reality, Bitcoin has survived in some of the biggest events recently. It surged during the COVID-19 pandemic and has done well after the collapse of FTX, Terra, Three Arrows Capital, and Celsius.
Bitcoin faces a major challenge ahead since the SEC is still suing Coinbase and Binance. History suggests that the coin will also survive these lawsuits since it has survived bigger issues in the past such as the collapse of MT. Gox.
The case for Bitcoin
There are several reasons why investing in Bitcoin makes sense. First, Bitcoin has outperformed gold and other assets that Peter Schiff touts. Bitcoin has surged from near zero in 2009 to over $37,000 today. In the same period, gold has risen from about $700 to $2,000.
Second, Bitcoin has done well with little to no institutional help. Most big institutional companies like Blackrock, Vanguard, Pimco, and JP Morgan have stayed in the sidelines. These same companies are some of the top holders of gold. Some central banks could also move some of their reserves to Bitcoin.
Therefore, if they allocate less than 1% of their assets in Bitcoin, it will lead to huge demand of the coin. Remember, Bitcoin is a finite resource. Over 19.5 coins have already been mined and 4 million have been misplaced. This leaves less than 1.5 million coins left to be mined. Bitcoin supply in exchanges has also crashed.
Further, Bitcoin is a safe asset whose software has maintained its integrity over the years. The hacks that happened in Bitcoin were because of the platforms that operate behind the scenes like exchanges.
Bitcoin also has a technology that reduces oversupply in the market. Halving, the next which will happen in April next year, will make it difficult for people to mine.
Another concern has always been that another version of BTC can be created. Sure, coins like Litecoin, Ravencoin, Bitcoin SV, and Bitcoin Gold have been created. But they have all lacked traction among investors.
Taken together, I believe that Bitcoin has more room to run in the long term as it becomes a better alternative to gold. Watch here: https://www.youtube.com/embed/l-N1Mb3xTi8?feature=oembed
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