Peter Schiff & Bitcoin Bubble

Sometimes people are so entirely wrong on the subject of Bitcoin and digital currencies in general that it must be either because they are completely incompetent or they are intentional spreading false information. This is never more true than when it comes to Peter Schiff, the perpetual Bitcoin bear but a very bullish gold investor. How can someone who works with investments on the institutional level not understand Bitcoin?

In a recent CoinDesk article (https://www.coindesk.com/bitcoin-bear-peter-schiff-doubles-even-4000-still-bubble/) Schiff made comments that are truly moronic (either intentional because of some hidden agenda or because he really is a moron and no one noticed) and which I would like to address individually below. However, before all that I would like to address the word that has been commonly circulated lately and that is the word "bubble". It seems that almost everyone in finance has been brainwashed to automatically refer to any asset class that has breathtaking gains as a "bubble". But what is a bubble? To meet the definition of a bubble, an asset must rise beyond its fundamental or intrinsic value and it also must have a large percentage of the population speculating on it.

But this makes Bitcoin and some other blockchain assets the furthest thing from a bubble. First, it has no fundamental or intrinsic value (just as gold doesn't) so there is nothing to stop Bitcoin from rising at a faster and faster pace, simply at the velocity of money coming into it. Unlike, say a stock of a public company, that stock must at some point be backed up by actual business results. So the internet bubble in the late 90s popped because the companies representing the stocks traded on the NASDAQ turned out to be nothing but a fantasy. Once investors realized that earnings and growth were not coming the bubble popped in a big way. In the real estate bubble of the early 2000s, every Tom, Dick, and Harry were buying and flipping properties and in many cases it was easier to buy a property than to rent one. When a guy flipping burgers tells you he owns three properties that he can't possibly afford this obviously creates an unsustainable situation, not to mention corrupt lenders who were looking the other way. What does any of this have to do with Bitcoin? The entire number of users in the cryptocurrency community is approximately 3 million out of a global population of over 7 billion people! How is that a bubble? It certainly isn't.

There is no "bubble" in Bitcoin and in fact the rally and growth in Bitcoin hasn't even started yet. The average person doesn't even know what a blockchain is and how it works. Its only been a year that real investors have started looking at it as a real store of value and prior to that it was poorly understood or seen by many as a way to buy drugs on Silk Road.

What is the real potential value of Bitcoin? There are several metrics that can be used to estimate that. The simplest of which is to assess Bitcoin as an efficient store of value, a purpose that gold has served for thousands of years. In the age of rapidly evolving technology it was just a matter of time until a better store of value would emerge. The problem with gold is that it is very difficult to move around, difficult for the average person to buy, and certainly difficult to pay someone with or transmit to someone (try buying something from a supplier in China by sending them a gold coin and see how it goes). So let's use that as a simple metric.

• Currently the total amount of gold that has been mined in the world is approximately 5.8 billion ounces.

• The current cost per ounce is $1300 and that means the total value of gold that has already been mined is $7.6 trillion.

• Because of the advantages of Bitcoin (it is also money, tool for commerce, has incredible security features built in, and the fact that the number of Bitcoins that exist is known and fixed while gold will continue to be mined and its supply will continue to increase to levels that are not known) should give it a 2x premium over gold.

• It is therefore reasonable to expect that the total supply of Bitcoins should reach a value of over $15 trillion or about $750,000 per Bitcoin as the absolute minimum.

Of course Schiff says "Bitcoin ain't money". Well sure it is Peter. I can go out and buy a house with Bitcoin or a 200 foot luxury yacht or an island. But not only is Bitcoin money, it is the most perfect money ever created. It is not being printed in unlimited quantities, it is truly controlled by the people, and you do not have to trust a 3rd party to store it for you. There has never been a more ideal money in the history of the world. How Schiff says "it ain't money" is beyond all logic and reason.

And how does Schiff talk out of both sides of his mouth and go on to say that everyone should be holding gold? Gold certainly has no more intrinsic value than Bitcoin - it is just a rock with specks of metal dug out of the ground. The only reason gold costs $1300 per ounce is because everyone agreed that it will be a store of value and because it is scarce (although Bitcoin is a much more scarce asset than gold) and if you had a bunch of gold nuggets lying in your back yard and each of your neighbors had it too, gold would cost no more than granite.

But then Schiff lays a comment that is likely the dumbest thing I have heard all year - "Even if you believe that cryptocurrency is going to work, how do you know that 10 years from now bitcoin is going to be the one? If digital currencies can work, someone can come up with another one. And another one. And another. And another. There's nothing special about bitcoin that another cryptocurrency can't replicate and improve on. Right now, bitcoin is just the most popular because it was first," he said."

Bitcoin, just like gold, is subject to a network effect. In other words, scarcity alone is not enough. For example, there might be a very rare plant in the Amazon forest of which only 5 examples have been found. But just because it is scarce doesn't automatically make this object very valuable or make someone willing to pay a lot of money for it. Over the course of thousands of years people agreed that gold would be an excellent store of value. So no matter how many other cryptocurrencies come out, Bitcoin will always be Bitcoin and the other currencies will either deliver other features that people will find valuable and therefore gain in value or they will be a copy of Bitcoin, in which case they will have no reason to exist and will never gain any value (because of the network effect).

And then Schiff leaves his final nugget of wisdom by saying "How do we know that someone isn't going to come around and do to Facebook what Facebook did to Myspace?" as a reference to Bitcoin - what an idiot.

Anyone who takes time to truly understand Bitcoin and how it works quickly realizes that this is a major technological breakthrough, way ahead of its time, so advanced that it may as well be alien technology (and since no one knows who Satoshi Nakamoto is, he may as well be an alien). After doing my research I am completely convinced that Bitcoin is the single greatest once in a lifetime opportunity. Much bigger gains are ahead. Don't miss it.