"Whatever you do in life, surround yourself with smart people who'll argue with you."
"Whatever you do in life, surround yourself with smart people who'll argue with you."
Let me start off by saying the I agree with most of what Peter Schiff says. I have learned a lot about economics and finance from him and disagreeing with him does not mean that I don't support him or appreciate his views. But when it comes to Bitcoin he just doesn't get it.
With the recent pullback on the DOW we are seeing more and more of Peter Schiff (rightfully so) and he is giving his views on bonds, stocks, gold and of course crypto. There are a few things Peter Schiff keeps mentioning every time he talks about Bitcoin and cryptocurrency that he doesn't understand which I am compelled to address.
The thing we hear most often from Schiff is that Bitcoin is crashing. Under what timeframe? Of course it's crashing. It just had 9 years of going from $0 - $20,000 with 2 major crashes in between. Name one other asset that had a 20,000x gain within a 9 year time period. This is unheard of. The growth in Bitcoin has been phenomenal. Even if it crashes to $1,000, which it very well could, it would still be a 1000x gain in 9 years. Nothing even comes close to this. We need to keep some perspective on this.
There is a difference between a crash because it needs a correction and a crash because it has no utility at all. He is conflating the two. I agree that it is crashing also. This crash is a correction. He sees the crash as the end of Bitcoin. He was probably right with the last 2 crashes that ended Bitcoin back in 2013 as well.
Schiff always talks about how gold is up since early 2000. Well Bitcoin is still way up since early 2009. So talking about a crash in the price from the perspective he is using is completely dishonest and manipulative. It just had a year of growth from $1,000 to $20,000. Let it pull back and correct a bit. Yes, of course there is a ton of speculation and get rich quick money in here inflating it. Let that all correct. None of this takes away from the true value of Bitcoin.
I even talked about how Bitcoin was over-valued and was ready for a crash in November of last year. This was when it was around the 6-7k range. I'm still expecting Bitcoin to go under 2,000 at some point in the next year. And even if it does that's hardly a crash. That's a consolidation and what you would expect to see happen in any free, non-government manipulated market. He knows all this. He says the exact same thing for gold all the time. After this "crash" Bitcoin is going to go higher than its ever been.
Goldmoney is Peter Schiff's gold backed electronic currency. The very promotion of this business, which he is a part of, shows that he still doesn't understand the true value of Bitcoin. I talked about this exact thing 4 years ago in an article called, Can There Be A Gold-Backed Bitcoin?
The value of Bitcoin isn't the ability to send money over the Internet for cheap or free.
I repeat: the value of Bitcoin isn't the ability to use technology to send money digitally.
Anybody can do that. Anybody can create an app that allows people to transfer money. Anybody can create an app that lets people transfer money backed by gold or whatever asset you want. That's easy. That's been done. And guess what?
The real value of bitcoin isn't the utility, the real value of bitcoin is the open source, decentralized nature. Bitcoin can't be stopped. That is the value. Let me say it again. The government can't shut bitcoin down like it can any of the other centralized businesses providing the same utility. The cryptographic nature of bitcoin allows it to be decentralized which allows it to get around a centralized entity controlling it which prevents it from easily being stopped. This is the real value. This is why so many people like myself were so into Bitcoin early on.
And for Peter Schiff, who understands the way government operates better than just about anyone, to not get this is troubling. He should get it quicker than anyone. He knows how bad the government fiat system is. He knows how bad central banking is. He knows the government will shut down any money business that competes with them as soon as it gets any real traction. And yet here he is doubling down on his digital gold business which will be shut down as soon as it gains any real traction.
Well guess what? Bitcoin can't be shut down. The cat's out of the bag. Find a way to subvert it and one of the other 1,500 cryptos will take its place. Shut them down and 150,000 more cyptos will arise. Shut one down and 10 more will replace it. And that is the value. And that's why so many people like myself are into it. We don't care about the price. We care about the tech. And no, not the digital money tech. Everyone has that. We care about the decentralized value exchange tech. That is the true tech that people, including Schiff, still don't understand.
It looks as though Schiff has caught wind of the transaction fee issue with Bitcoin. Yes, Bitcoin transactions are expensive right now. They have gone down considerably since the mania a few months ago but they're still around $5 a transaction.
But guess what?
There are 1,500 other cryptocurrencies that have lower fees. Bitcoin isn't the only crypto. Bitcoin may last or it may not. But cryptocurrency as a technology will live on. If Bitcoin can't get the fees right then one of the other 1,500 cryptocurrencies will. And many of them already have.
But there is more to it than this even. Bitcoin forked back in August 2017 because of this exact issue primarily. Bitcoin Cash changed their protocol to account for this and guess what? You can send Bitcoin Cash transactions for $0.02 a pop. If you don't like Bitcoin Cash use Litecoin. If you don't like that use Ethereum. If you don't like that wait a few months and start using IOTA or some other non-blockchain crypto and send for the energy cost of running a smartphone.
On top of all this there are innovations on the way like Lightning Network which could solve the transaction fee issue for a long, long time.
We heard these same arguments over and over again while the Internet scaled in the 90s. Email can never carry attachments. You will never be able to shop online. You can never do video over the Internet.
Yeah, okay. Give me a break.
You may not be using it, but other people are. It has advantages over other currencies which is why people use it. Yes, many people hold Bitcoin the same way they hold gold. People hold Bitcoin and transact in other cheaper cryptos. So? And once some scaling issues are resolved people will switch back over the Bitcoin. And if Bitcoin doesn't fix scaling issues then another crypto will take its place and people will use that.
Moreover, if people want to sit on it the same exact way they sit on gold what's wrong with that? People don't use gold to transact and we hear nothing of that. If people want to sit on Bitcoin as a store of value then that serves a very real utility. Why is it okay to not transact in gold but not okay to not transact in Bitcoin?
Value is subjective. Adding intrinsic in front of the word doesn't change this. If gold has intrinsic value because it can't easily be created then so does Bitcoin. If gold has intrinsic value because it can be used for things other than money then so does Bitcoin. Any way you slice it Bitcoin has intrinsic value for the same reasons precious metals do.
Peter Schiff is obviously a great guy and knows what he's talking about when it comes to economics and finance. The problem is, he's like one of those guys standing on the sidelines while the horse and buggy is being replaced by the automobile. He's the guy holding on to the newspaper while the Internet is sweeping the media. He's the guy who refuses to adopt the new technology because it shatters a piece of his current world view. It's like a religious person having a hard, hard time taking a higher level interpretation of their religion. His religion is hard money and Bitcoin is shaking that foundation.
And it's okay, it's good to be skeptical and take your time to make sure something is the real deal. Like 99% of things in life aren't the real deal and are BS. So it's good to not quickly adopt something because everyone else is. I respect what he is doing. Most people go the other way. Most people accept anything and just go whichever way the wind blows. Schiff on the other hand has great understanding in markets and has yet to find a way to fit this into his understanding.
He's behind the curve on this one. That's okay, it's hard to get them all right, especially something as revolutionary as Bitcoin. It's hard to really see the vision, utility and ramification of it before it has fully reached fruition. But the people who did and have early on have benefited and will continue to benefit greatly into the future from this understanding.Internet / Tech, Peter Schiff, Bitcoin