Investment guru and financial expert Peter Schiff isn’t convinced that the popular online cryptocurrency Bitcoin is really worth what the market says it is. During a recent interview with Scott Gamm on The Street, Schiff contended that Bitcoin holds no real value because it isn’t backed by anything other than people’s trust, and that at some point the digital fiat is likely to crash and burn.
Schiff has never really been a fan of Bitcoin, as he once famously likened it to “digital fool’s gold.” Bitcoin represents little more than a bubble, in his opinion – a game of “hot potato” in which some people are going to get really rich when the music stops playing, while many others who bought into the hype later on are going to lose big time.
Though the price of Bitcoin recently reached its highest level yet at roughly $7,800 per coin, the cryptocurrency has been in a constant state of flux almost from its start. However in recent months, it’s been steadily climbing, which has caught the attention of many investors looking to get rich quickly. But Schiff warns that the risks are much more significant than many people believe.
“There’s no real value, I believe, in Bitcoin,” Schiff stated emphatically when asked about Bitcoin’s bullish trend.
In many ways, Bitcoin is more of a BitCON, in Schiff’s view. He says that most people who are jumping onboard these days are doing so not to use Bitcoin as an everyday medium of exchange, but rather as a speculative investment asset for making money. At some point, this tactic will fail, which will happen right around the time that a critical mass of folks comes to the realization that Bitcoin isn’t actually worth anything at all.
One of the biggest problems with trying to utilize Bitcoin as an everyday medium of exchange is that the platform upon which the cryptocurrency was built is simply far too slow to process the number of transactions necessary to support an entire economy. While Visa and MasterCard are able to process tens of thousands of transactions per second, Bitcoin transactions are limited to just a handful per minute.
And even with its limited quantity, the mathematical limitations of Bitcoin prevent it from really lasting into the future. This presents great risks because nobody knows when Bitcoin will fail, though many believe that this failure is a mathematical certainty.
Even so, many people are now looking to Bitcoin not to replace fiat currency, but rather to replace gold as a store of wealth for investment purposes. Schiff says this is pretty much a joke as well, and that Bitcoin can’t really pass the muster in terms of competing with actual physical gold in what it can actually be used for practically.
“[Bitcoin] is a digital asset, but what it’s actual value is remains to be seen. But it has nothing in common with gold,” says Schiff. “There are certain things that you could say it has with gold, but you can’t do anything with it.”
“None of the real world uses of gold (are applicable to Bitcoin). I mean, gold is used in jewelry; you can’t make jewelry out of a Bitcoin. Gold is used in consumer electronics; it’s used in medicine; it’s used in aerospace. There’s no use for Bitcoin other than storing it as an asset.”
At the same time, many people value Bitcoin for what it is, and that alone gives it “value,” at least in terms of a cash exchange price. But will this last forever? Schiff certainly isn’t convinced that it will.
Sources for this article include: