Peter Schiff criticizes Bitcoin reserve proposal, warns of economic downfall

Economist and vocal Bitcoin skeptic Peter Schiff has recently criticized the idea of a US Bitcoin Reserve, which could be implemented if Trump returns to power.

Schiff’s criticism revolves around the US government purchasing a large amount of Bitcoin. Shiff, in the post on X, further argued that the purchase of Bitcoin will only be a start for it as “it might end up buying millions more.”

As Schiff noted, the first acquisition will cause a significant price jump of Bitcoin which will be profitable, especially for the early investors. In the process, once the value rises further, these investors may begin to liquidate, and therefore the quantity of Bitcoin that the government has will go down.

According to Schiff, the US may have to print more dollars to buy more bitcoins in light of this decline. He stated that this cycle would prove to be unviable because it would only serve to devalue the US dollar. 

Schiff has highlighted the fact that in this case, Bitcoin cannot be considered as a safe haven to the dollar as he sees the dollar going down and the long-term bearish trend for Bitcoin. He pointed out that such a situation was improbable, particularly given the fact that Bitcoin is still failing to sustain growth. He stated, “It goes without saying that this scenario would be an unmitigated disaster for the U.S. That’s why it’s highly unlikely that a Bitcoin reserve will ever be established.”

Despite Schiff’s warnings, the idea of the U.S. Bitcoin Reserve seems to be popular in Congress. Last month, Senator Cynthia Lummis introduced a bill that could make this idea a reality. Supporters of the initiative claim that Bitcoin is a powerful tool that could contribute to the further strengthening of the nation’s economy.

Schiff opposes Bitcoin as an institutional asset

Schiff’s skepticism of Bitcoin as a strategic asset is not a new thing. He recently responded to Fundstrat’s Tom Lee, who had proposed that Bitcoin could assist the U.S. in addressing its budget deficit. Lee suggested that Bitcoin could be used to solve the US debt issue, which currently stands at $36 trillion, since the crypto may appreciate and help pay some of the debt.

However, this view was not supported by Schiff as he pointed out that Bitcoin is very volatile and has liquidity risks. Schiff added that such a change would compromise any attempt at establishing stability in the economy.

The price of Bitcoin has risen sharply in the last few days, along with the rest of the cryptocurrency market. On Monday alone, Bitcoin jumped 9.89%, with its weekly gains rising to almost 28.80%. As of the time of writing, Bitcoin is at $87,106 and reached a high of $87,412.