Peter Schiff, the guy made famous by his CNBC appearances (also watch here) during the Greenspan-Bernanke Great Inflation, the biggest credit bubble in the history of mankind, for warning the world of the residential realty bubble, hates Bitcoin. Being a "muh gold" guy, of course, Schiff never tells you that he is a gold merchant, Schiff seems to take every chance to slag on Bitcoin.
Earlier today, Schiff tweeted:
Let us unpack Schiff's confusion from a tweet of his of today:
Of course Bitcoin is not money. Then again, the U.S. dollar is not money. As to the the dollar, the dollar is a bank note in the form of cash. A bank note is evidence of banking deposits put into circulation. What fools people into believing the U.S. dollar is money is that as cash, the U.S. dollar has bearer negotiability, i.e., property, which is the right of ownership, goes with the possession.
Money originated as coined metal by weight and fineness. Money, were it to exist, could exist without bankers or government.
In the days of Colonial America, Americans traded with Spanish money. They did not mint their own coins. That right there shows to anyone what money is.
Spanish money had all of the characteristics of money. It was coined metal by weight and fineness, which could be proved by assaying. It did not needing government for its issuance or required acceptance, i.e., not decreed legal tender. It had universal acceptance. Every American who had anything to sell, would have sold their goods and bought Spanish money in purchases and sales.
Technically, Bitcoin is software with provenance proved by a distributed database known as a blockchain that prohibits duplication. See my work: BITCOIN IS SOFTWARE PROTECTED BY COPYRIGHT. BITCOIN IS NOT LEGAL TENDER CASH NOR IS IT MONEY.
Because it lacks bearer negotiability, i.e., property does not go with possession as the blockchain proves property, and because it is not universally accepted, i.e., many would not take Bitcoin at all if offered Bitcoin in any purchase and sale for goods or services offered, Bitcoin simply is not money.
Yet, Schiff's dopey claim that Bitcoin coin can not be money because of a tweet simply shows us that Schiff himself does not understand money and what money is.
A quick thought-experiment ought to clear up everything. Let us suppose the world is running on money rather than fiduciary monetary systems of irredeemable bank notes like the U.S. dollar banking system, the Euro banking system, the Yen banking system and so on.
Let us then suppose someone known tweets out that a strike of gold has been found in Canada, the largest strike in the history of mankind. Well, the "price of gold" in terms of products would plummet and do so all from one tweet.
People are in the habit of looking at purchase and sales from the view of transacting medium. So a dollar buys so much X or in the past, gold buys so much X. Yet, in a purchase and sale, there is a seller and a buy. So for every seller of dollars, there is a buyer of dollars. Hence, a car sold buys so much dollars. A bag of groceries buys so much yen and so on.
Now, in so far as Schiff's statement about Bitcoin being gambling and not investing, this too reflects Schiff's lack of understanding what either is.
Gambling has set rules with calculable payout based on a fixed set of possible outcomes. Gambling had artificial odds set by the game maker. The odds of any outcome happening always is favorable to the house that runs gambling.
Investing is the act of as the placing of capital in a more or less permanent way mainly for the income to be derived therefrom. In short, investing is buying an income stream. So a pizzeria owner buys ovens, foodstuff, natural gas and so on for the purpose of deriving an income stream by selling pizza. Likewise, a stock investor buys a divident paying stock for its regular payment. The same is said of the bond investor who buys for the coupon.
Like most, Schiff confuses and conflates investing with a different concept—speculation. Speculation is a bet on the future price of something, often a security, i.e., a stock or bond.
Hoping for a price rise in something is naive optimism to be sure. Yet, knowing how organized markets work and thus the technical position of an organized market, along with the technical conditions that give rise to technical positions is intelligent speculating. It is far from gambling. It is a skill and such a skill often commands a high price in the job markets seeking such skills. Wall Street pays well for those who understand how organized markets work.
To be sure, Bitcoin has crashed after hitting its all-time high one month ago. Bitcoin has fallen around 30%.
Likely, what has been happening in Bitcoin is that weaker hands have been selling from their margined positions to cut their losses. Shorts are getting their turns to take profits. Hence the falls are in splotches. The pressure is on margined speculators.
How much further will it go until margined players are pushed out could better be known if there were btter stats on the technical position of the market.
Days ago in the cryptocurrency group on Gab.com, I mused about a coming BTC crash because it had stalled in the low 50s after hitting its all-time high just weeks before. After a crazy long run up, that stalling sure seemed like a classic sign of a pending crash.
Well, that crash came. Margin buying gets expensive when ever high prices do not materialize.
On the worst inflation news in 30 years, BTC should be advancing since its supposed reason to be is "digital gold," i.e., an inflation hedge.
Most "muh Bitcoin" lovers believe 30% swings are mere volatility. Such is not. Falls of 30% that come in days are crashes. Right now, we are seeing volatility in BTC as it oscillates roughly between $43,000 and $45,000.
It is true that BTC seems to have higher volatility than many speculative bets such as stocks, as BTC can fluctuate up to 10% in price either way on any given day and often does.
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