Gold has reached historic highs, rising above $4,000 per ounce, while Bitcoin is struggling to maintain its position in the face of increasing geopolitical tensions. Peter Schiff, a long-time gold bull, thinks that this recent market behavior proves his long-held opinion that Bitcoin cannot be regarded as the digital equivalent of gold.
Gold’s spike to record highs has raised eyebrows among investors. Gold traded for more than $4,000 for the first time in history. This sharp increase is a result of several economic and geopolitical factors, including concerns about inflation, heightened worries about fiscal risks, and the escalating U.S.-China trade conflict.
Despite reports of inflation slowing down, central banks, especially those in emerging markets, have continued to add to their gold reserves as insurance against global economic upheaval. The recent increase in U.S.-China trade tensions has added even more fuel to this flight to safety.
On October 10, U.S. President Donald Trump’s issuance of a threat to impose 100% tariffs on Chinese exports sent traditional markets into a tailspin, and gold prices surged.
Schiff’s gold-Bitcoin divide
Peter Schiff views the disconnection between gold and Bitcoin as evidence of his theory that Bitcoin is not a safe-haven asset. While Bitcoin fell along with other risk assets, gold rose, to shine through as a store of value in times of crisis. Schiff believes Bitcoin, unlike gold, is a risk asset that follows tech stocks and other speculative investments.
He noted, “Gold’s surge is exposing the fiction that Bitcoin is digital gold. The bottom can drop out of Bitcoin at any time.”
The recent market declines in Bitcoin, in his view, corroborate the case for Bitcoin being unable to replace gold in an investor’s portfolio.
Schiff also contends that Bitcoin is not scarce, claiming that the divisibility of Bitcoin into satoshis is incompatible with the concept of true scarcity, which gold has by virtue of its limited availability and non-reproducibility.
While Schiff’s argument appears to be compelling in the short term, the long-term outlook for Bitcoin is less clear-cut. Bitcoin proponents argue that its volatility doesn’t mean it cannot serve as a long-term hedge.
Schiff acknowledges that Bitcoin’s performance has been poor in the short term, but notes that the increased media coverage around gold could help create short-term corrections, which he believes are small. He expects the gold rally, which is largely driven by institutional investors, to have only just started.
Bitcoin price began the week on a high note, continuing its recovery from the weekend on Monday, closing above $115,000 after a massive dip last week. However, this momentum was broken on Tuesday as Bitcoin fell below $112,000.
Meanwhile, Schiff cautions that the demand for Bitcoin fueled by ETFs could suffer a “sudden reversal” if holders of these shares start redeeming them in large numbers, triggering a liquidity crisis and a possible price crash.
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