Peter Schiff is a well-known investor in gold and CEO of Euro Pacific Capital. He has been criticized by many analysts and experts, including Brian Kelly of CNBC. The reason: he calls Bitcoin a “digital fool’s gold”.
In general, Schiff’s ignorance of Bitcoin seems to stem more from his responsibility to protect Euro Pacific Capital. Euro Pacific Capital’s business model is based entirely on gold. Schiff has traded most of his career only in gold and so it seems only natural that he wants to defend gold against Bitcoin.
But some innovative and successful investors know that you only make profit in a market by beating yourself. An investment or currency that has been beating the market for three years is Bitcoin, which beats all fiat currencies, stocks and investments – even gold.
Rarity, the news spy and decentralisation
The current general basis of criticism against Bitcoin is the lack of network moderators and the news spy origin of its value. Conventional economists in particular have a problem understanding Bitcoin as a rigid supply, as the news spy could theoretically lead to economic problems in the future.
Rarity, scarcity and decentralisation are the three main characteristics of Bitcoin that conventional economists like Schiff warn against, but in fact these three aspects are the strengths of Bitcoin. These characteristics of Bitcoin are the reason mainstream analyst Brian Kelly provides fair and balanced reporting on Bitcoin.
In a debate with Schiff, Kelly explained:
“For me, it’s just Bitcoin. Bitcoin is not just digital gold. It’s a technology platform for FinTech companies. It’s a unique investment opportunity, similar to the Internet, and may even grow faster. It is the Internet of money. Everyone is affected by it. The Federal Reserve published a paper on the subject. The Bank of England is on board. 14 of the top 30 banks have active projects running.”
Kelly’s statement is factually correct because Bitcoin is a technology platform and the open source protocol allows anyone to build on it. Bitcoin as a basic protocol is a payment tool. It simplifies payment between two parties without the need for a middleman.
On the top layer of the technology there are two-layer solutions that allow Bitcoin to be transformed into a settlement system or a financial product.
Bitcoin’s structure is not an imitation of gold
Schiff, however, argues that Bitcoin’s structure is an imitation of gold, an alternative to fiat currencies. As mentioned above, Bitcoin is not a gold replica, or a replica of the financial system of governments worldwide. It may behave like gold or a currency, but it was not created with the structure of the two.
When Schiff declares that gold is the more efficient version of Bitcoin, he means the commodity aspect of gold. Gold is a commodity and an investment. But it is not a payment unit and not a settlement network. Its value depends on an infinite supply, which could increase exponentially if large deposits of gold are found in the future.
If Bitcoin had a bug that would lead to the creation of Bitcoins from scratch, the value of Bitcoin would not be where it is now.