Peter Schiff makes a Bitcoin confession in his most recent podcast, and it is making waves in the crypto community.
Peter Schiff is CEO and chief global strategist of Euro Pacific Capital Inc. He is a Perma gold bull and a strong supporter of the Austrian School of economic thought. So, Peter Schiff believes in the theory of laissez-faire economics, which advocates free-market capitalism that opposes government intervention and which is in contrast to state capitalism.
“Peter Schiff makes a Bitcoin confession in his most recent podcast, and it is making waves in the crypto community”
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The genre of our era is state capitalism, a political system where the state has control of production and the use of capital, so Austrian thinkers don’t get the mainstream stage.
Peter Schiff has always been skeptical about cryptocurrencies, which is somewhat odd, bearing in mind the crypto community has a decentralized libertarian ideology that sits well with Austrian thinkers.
When Peter Schiff makes a Bitcoin confession saying in a recent podcast that he “regrets not buying bitcoin when he first heard about it”
That is a change of tune to what Peter Schiff has been referring to Bitcoin as a Ponzi scheme where the value is based on the Greater fool theory where the price is determined by whether an investor can sell it for a higher price, at a later point in time to a greater fool.
Peter Schiff believes Bitcoin is running out of greater fools.
In the same breath, Peter Schiff added, “that it is now too late to get into the digital currency as its future is limited”.
“regrets not buying bitcoin when he first heard about it”
There is nothing new about blockchain technology, a digitally encrypted ledger it has been around since the 90s.
But it is the application of the technology, the idea of a digital decentralized ledger recording encrypted transactions and fixing the supply of tokens that creates scarcity, imputed value, and the idea of a store of value.
Bitcoin uses blockchain technology (30 years old) and a proof of work consensus mechanism to validate transactions, it is a disruptive technology
But what happens when disruptive technology is disrupted by even more advanced technology?
“I did not then foresee that it could be so widely adopted by so many people” – Peter Schiff
Bitcoin is considered a store of value because of the encryption which prevents the blockchain from being hacked.
All levels of encryption can be hacked. If a security system was designed by smart humans, it can be hacked by even smarter humans.
Let us take you on a journey back in time.
The world war II German Enigma Machine facilitated the use of encrypted communications between military and diplomatic branches. The Enigma Machine codes were considered uncrackable at the time.
Nevertheless, Polish mathematicians had worked out how to read Enigma messages and shared them with the British. Then Alan Turing, brilliant British mathematician, built the world’s first computer, which he successfully used to crack the entire enigma codes.
Fast forward to today, Google AI is a partnership with NASA, October 2019 to perform quantum computations that is not possible on any classical computer.
What if the latest advancements in quantum computing disrupt the blockchain?
Will bitcoin be considered a store of value if its blockchain is hacked?
But back to the theme, Peter Schiff makes a Bitcoin confession that the concept behind the largest cryptocurrency by market capitalization was intriguing to him
In a conversation with Natalie Brunell during her Coin Stories Podcast Peter Schiff said that people started talking to him about bitcoin when the price was under $10 a token. He added that the concept behind digital currency fascinated him.
Peter Schiff explained that the idea of having a decentralized currency sounded appealing; however, he saw some faults in the fledging market and couldn’t see its potential.
“I did not then foresee that it could be so widely adopted by so many people. Certainly, I didn’t foresee major companies or investment banks getting involved. I know that I was mistaken that this thing could ever get to such a big bubble” he said during the podcast. “I mean, I appreciated what it was trying to do. As a hard money guy, as a libertarian, I appreciated it. I just was more focused on the underlying flaws” said Peter Schiff.
“Bitcoin can’t compete with gold’s 5,000-year history as a store of value” – Peter Schiff
Peter Schiff said that he wouldn’t invest in it now as he expects the digital currency market to eventually become worthless.
“I wouldn’t even consider buying it now. As far as I’m concerned, it’s all risk. The upside is limited, and the downside is huge” he said.
While people are still making money on Bitcoin as an investment, Peter Schiff said that bitcoin is in a bubble and its future is limited. He compared the crypto market to the early 2000s dot-com rally and the 2008 housing market.
“There are a lot of smart people that are in bitcoin. There are a lot of smart people in dot com stocks that went bankrupt in 2000. There were a lot of smart people in the mortgage market” he said. “there’s always a lot of smart people on the wrong side of the trade. But there’s also a lot of smart people who have completely rejected bitcoin. I think there are more smart people on my side” said Peter Schiff.
Peter Schiff makes a Bitcoin confession wishing he had invested earlier but he said when it comes to the real value, he prefers gold.
Peter Schiff thinks gold will outperform fiat currencies, including the US dollar going forward.
“Bitcoin can’t compete with gold’s 5,000-year history as a store of value” said Peter Schiff.
Indeed, in gold’s 5,000-year history no technology has disrupted precious metals as a store of value
Will the same be said about Bitcoin?
“The headwind for gold right now, temporarily, is the false belief that inflation is transitory; that the Fed is going to normalize interest rates and shrink its balance… that it’s going to bring inflation back down to 2%. I think that view is completely wrong, but that is the view that dominates the market. At some point, that view is going to change either because the Fed admits that it’s not going to do those things or the market figures it out on its own” said Peter Schiff.