Bitcoin is an asset that is fueled almost entirely by “false hope” and should demand falter, the price is just going to “collapse”, said Peter Schiff, chief market strategist at Euro Pacific Asset Management.
“Ultimately, bitcoin is going to collapse, and any demand that it might have siphoned away from gold is going to return to gold. The bitcoin story is one of a bubble, it’s a modern-day Tulip Mania, it’s fool’s gold,” Schiff said.
Bitcoin is simply a Ponzi scheme, where the price is supported solely by demand, and when it does falter, the “greater fool” will be left holding onto the losses, Schiff said.
“There are two kinds of people that are in bitcoin: there are the people that don’t know it’s a bubble and don’t know it’s worthless and then there are the people who do know but they don’t care, because the price is going up and they figure they’re going to get out before the bottom drops out, but I think that’s a lot harder to do. People think they can get out, but I think most people are going to be trapped,” he said.
Importantly, bitcoin’s recent price surge has not been driven predominantly by institutional funds, Schiff said.
“I think some institutional money has gone in. Obviously there’s been a couple of hedge funds that have gotten involved, but as a percentage of all the institutions that are out there, it’s tiny. I think it is being blown out of proportion,” he said.
On the economy, Schiff said that Biden’s recent $1.9 trillion stimulus plan is nothing more than a “sedative” and that inflation is still expected to occur.
“I think [prices] would be rising much faster if it wasn’t for the rest of the world bridging the gap between what we produce and what we consume through trade, but I think that’s coming to an end. The Chinese and our other creditors are no longer buying U.S. Treasuries,” he said.
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