Peter Schiff is a world-renowned investment advisor and market forecaster who owns his own precious metals corporation, Euro Pacific Precious Metals. He is maybe best known as the one pundit or market expert who predicted the 2008 market collapse in the United States. This prognostication has given him a lot of credibility in predicting the future of the financial markets.
The only problem is, as wise as he is about fiat currency and precious metals, he has less experience when it comes to the revolutionary new asset class known as decentralized digital currency, spearheaded by Bitcoin. Three years ago Monday, he called Bitcoin “
Tulipmania,” “ the wrong choice,” and “ isn’t a store of value.” Let us review his critiques and see if he was right or wrong about Bitcoin.
So much for “Tulip Mania”
Just as a refresher, many financial gurus, Peter included, have incorrectly used the term “
Tulip Mania” when describing the Bitcoin market. This was a common mistake in 2013 when Bitcoin was just making waves in 2013. “ Tulip Mania” was a period in the Dutch Golden Age during which contract prices for bulbs of the recently introduced tulip reached extraordinarily high levels and then suddenly collapsed.
At the peak of tulip mania, in March of 1637, some single tulip bulbs sold for more than 10 times the annual income of a skilled craftsman. It is generally considered the first recorded speculative bubble, which lasted from 1834 to February of 1637 when the market collapsed forever.
Bitcoin has some similarities to this phenomenon. Bitcoin also had a market collapse after about four years (
2013 : Mt. Gox,) losing about 85% of its value, and bottoming out in January of 2015. Unlike the Tulip market in Holland, however, Bitcoin is back on its pre-crash trajectory. If you remove the Mt. Gox bubble from 2013-2014, Bitcoin’s price is on the exact same arc it would’ve always been on. Mt. Gox was the market bubble, not the Bitcoin market itself. That is the critical difference.
In November 2013, when this video was made, and Bitcoin was at its all-time peak of over
$1000 USD, Peter said the following about Bitcoin:
The problem with him not knowing this important distinction is he then goes off on a tangent about how great Gold is and how worthless Bitcoin is when he clearly doesn’t know what he’s talking about. Here’s an example:
This has been proven incorrect, as you can use Bitcoin transactions to post title deeds for property, marriage certificates, and other documentation on the Bitcoin blockchain as an immutable proof of ownership/work.
He also goes off on some tangent about this “
intrinsic value” Gold has over Bitcoin. How is Gold “ intrinsically valuable?” Yes, it has some manufacturing uses, but it does not derive its value from manufacturing. If I gave Peter a gold bar, what would he do with it, besides sell it? Does making a necklace or bracelet out of gold make it “intrinsically valuable? Bitcoin’s utiility and ease of use makes it far more valuable than Gold, IMO.
This video is old news, so I’m not going to critique it in-depth, but remember Peter had a vested interest in the Gold/Silver market, obviously. It is important to realize that Gold peaked at
$1800 USD in 2011, but had lost value for two years straight before the making of this video. Same went for Silver which peaked at about $40 USD, and it following Gold into the guttar, figuratively speaking.
As peter did mention, people who would normally buy Gold or Silver in 2013 went in on BTC, and that didn’t help the precious metals regain their market footing, it hurt them. People who jumped in on BTC in the fall of 2013 were in for a fall starting in December, but investing in Gold wasn’t any better.
Gold has dropped steadily until 2016 when it has finally seen gains of about
15% to this point. Five years later, Gold is still down about 30% from its 2011 peak, and Silver even more than that. Bitcoin, in contrast, is up about 70% this year, and thousands of percent since the same point in 2011.
It has proven itself to be a trusted store of value since before the making of this video,
in the Cyprian crisis of April, 2013. Grexit, Brexit and the election of Donald Trump have also proven this fact. Bitcoin may not be a perfect store of value,l but it has been far better than Gold or Silver over the last five years, so Gold or Silver as a store of value, and therefore money, does not hold water. Bitcoin has more than held its own against Gold as a valuable commodity/ investment.
In closing, I like Peter Schiff and respect his understanding of the greater economic market, and the severe flaws in the current system, He is trying to lead people in the right direction, which is away from dependence upon the U.S. Dollar, or any fiat currency as a long-term store of wealth. He’s right on that point. Unfortunately, he was not educated in what Bitcoin is in 2013, and it showed. He has since had “
debates” with Eric Voorhies ( here and here) about Gold vs Bitcoin and is more up to speed with this revolutionary technology.
You’re never too old, or too wise, to learn something new, and Peter has learned that Bitcoin is not “
the wrong choice” by any stretch of the imagination. It is not in line with his vested interest in Gold, and that was the main problem for Peter, as he says at the end of this video.
Bitcoin is not going anywhere, and neither is Gold. Gold has been mined for thousands of years and will continue to be mined, in much larger quantities than Bitcoin, for another few thousand years. Bitcoin is a unique creation no one should compare to any other. It’s not “
Gold 2.0.” Maybe that’s what he heard on the street and took it literally, but Bitcoin and Gold are both valuable assets that will continue to be wise investments for years to come.
Hopefully, you have the wherewithal to own both, and then pass judgment yourself. Peter did not, and that was his first mistake. This was a common mistake by the mainstream investor or market expert in 2013. Peter Schiff, nor any other credible pundit makes these same mistakes today. Bitcoin has proven itself to investors and so-called market experts, and it has earned the respect it deserves.