Editor’s Thoughts: Is Peter Schiff Right on Bitcoin?

It’s hard to be a Bitcoin (BTC) bull these days. The recent Bitcoin price is at a low of $20,000, and two recent attempts to regain the $25,000 level have failed.

To recapture its highs of around $68,000, Bitcoin would need to double in value and then gain another 70% afterwards. On the other side of the trade, Bitcoin needs to shed another $9,000 or so to reach the very worrying $10,000 level.

Hate to say it, but everyone’s favorite (or least favorite) Bitcoin bear Peter Schiff wins the debate. Consider our previous article covering Peter Schiff which you can read here. Schiff used technical analysis to argue in mid-August that the rally that pushed Bitcoin to the $24,000 level was fake.

Fair warning: Schiff is on the losing end of the trade when he meets hodlers who bought Bitcoin years ago. However, with 40% (probably much more now) of bitcoin investors underwater, this article focuses on the short-term price action.

The Bitcoin catalysts that are anything but

Invezz previously reported in September 2021 how Schiff claimed that using cryptocurrency would result in higher consumer prices. Two months earlier, another article covered Schiff’s comments that Bitcoin is doomed to hold the $30,000 level.

All that said, Schiff is bringing in W’s big time — at least for those on a very short time frame.

The latest Bitcoin news is full of what seem like bullish catalysts that will prove Schiff’s bearish stance wrong. For example, Forbes describes BlackRock’s (BLK) new spot bitcoin private trust as a “game-changer” that opens up Bitcoin to BlackRock’s $10 trillion warchest.

Fidelity, Citadel and Charles Schwab also announced the launch of a Bitcoin and cryptocurrency exchange called EDX Markets (EDXM).

The press release quotes EDXM’s board as stating that the cryptocurrency market is a “$1 trillion global asset class with over 300 million participants and pent-up demand from millions more.”

One of these developments in itself should convince anyone sitting on the sidelines now is a good time to buy Bitcoin. But, no. The Bitcoin price failed to gain any momentum, proving that what seems like an encouraging and bullish development is anything but.

So what will it take to help support Bitcoin’s price higher? BlackRock is the world’s largest asset manager, while Citadel considers itself to be the “Amazon of the financial markets.”

I can’t imagine any more meaningful catalysts that will propel Bitcoin anywhere near the peaks. In other words, Schiff’s victory dance (assuming he takes one) will continue for quite some time, if not indefinitely.

But what about El Salvador?

El Salvador’s experiment with Bitcoin as legal tender has passed the one-year mark, and to say that it has been a success is part of the truth. Part of the original presentation by President Nayib Bukele to the global financial community was “invest here and earn all the money you want.”

As a reminder, bitcoin was trading near $47,000 at the time. You do not need to indicate the current trade price.

Recently, Reuters highlights a National Bureau of Economic Research (NBER) study that found that only 20% of the population downloaded the Chivo crypto wallet shortly after it was offered to the public with a free $30 credit. Fast forward to 2022 and “almost no downloads have taken place.”

The report also says that locals do not understand Bitcoin, nor do they “trust it.” This comes on top of the coin’s extreme volatility and high fees. Given El Salvador’s status as a third world country, adding more economic hardship to the people at the expense of bitcoin is certainly a failure.

Our data analyst Dan Ashmore traveled to El Salvador to see the Bitcoin experiment first hand. You can read his wonderful article here, but his observations more or less agree with the NBER report.

Dan tells me:

Bitcoin is a complicated concept that takes time to get your head around. In El Salvador, it was declared legal tender overnight without warning to the people – announced from a Bitcoin conference in Miami. The lack of input from the people, and the absence of adequate education to inform people how to use it and what it might be useful for, has hurt the whole project so far.”

But who was right about El Salvador’s Bitcoin experiment from day one? You guessed it, everyone’s favorite (or least favorite) Bitcoin bear. Schiff said on RT shortly after Bitcoin became legal tender:

El Salvador is in a lot of trouble. What they need is a dose of free market capitalism. They need massive deregulation, they need less government. They must unleash the entrepreneurial spirit in that country. And instead of embracing Bitcoin, they should embrace capitalism. That’s the way out of this mess.

I don’t want Peter Schiff to be right, but he is

I have nothing against Peter Schiff, he seems to be very well informed and educated about Bitcoin and the cryptocurrency market. Much of the hate directed at him stems from the petty bias of the Bitcoin Bros who will not tolerate outside opinions.

I have skin in the game, so it is in my own financial interest for Schiff to be wrong. My main exposure to Bitcoin is through a Bitcoin mining company called BitFarms that trades on the Toronto Stock Exchange and Nasdaq.

Just like the digital coin, the stock is taking a beating, down 75% since the start of 2022 with no relief in sight.

Ouch.