Peter Schiff said on Nov 29 that bitcoin (BTC) fails as both money and a store of value because it lacked utility and intrinsic value — a measure of what an asset is actually worth.
“Bitcoin is not a store of value,” Peter, a known gold bug and bitcoin skeptic, said in a debate on Twitter examining the varying merits and demerits of gold and BTC as money and as a hedge against monetary inflation.
“It has no value to store, just a market price. You can’t store price. Before something can become money, it must first have underlying value,” he mocked.
Clash of the Schiffs
In the debate, Peter clashed with his pro-bitcoin son Spencer, as the two often do on the social networking site. The longstanding tiff between the Schiffs was provoked by popular futures and forex trader Peter Brandt’s picture-post of a gold coin from South Africa.
Brandt showed off his gain on the coin, which he bought 40 years ago. Since then, his Krugerrand gold coin “has increased by a whopping 3% per year.” Thanking Peter Schiff for the “original trade tip.” Brandt boasted, “We do not call it bullion for nothing.”
But Michael Saylor, chief executive officer of U.S. tech firm Microstrategy, a huge bitcoin proponent himself, immediately countered the post.
“The idea of gold as money does not stand up to a rigorous inspection based on first principles,” Saylor asserted. “It is a myth told by commissioned sales professionals intent on branding an industrial metal.”
Peter was on standby to pour cold water on Saylor’s assertions. He explained that “gold has stood up as money for thousands of years and bitcoin has yet to stand up as money for even one year. Bitcoin is merely a digital token used for speculative trading.”
‘Gold is not the best money’
His own son, Spencer, countered, saying that gold’s relative longevity did not make it the best money: He argued that the industrial uses of gold, as well as its centralized custody, disqualified the yellow metal from being the money of choice in the 21st Century.
Spencer broke down his position:
In 1971, gold was indeed the best money in existence. A few decades later, that changed. Its industrial uses only justify its non-monetary value. Its monetary premium comes from its monetary attributes, which have nothing to do with how gold can be used in your iPhone.
Suggesting that his son had been “brainwashed by the bitcoin cult”, Peter could not be put down: “A key monetary property is utility as a commodity. Without that none of the other attributes matter. That is why bitcoin fails as money.”
In his response, Spencer told his father that he was “completely wrong” and apologized for it. He insisted that “money should have zero industrial uses” and bitcoin fits that bill. The top cryptocurrency is already being used as a store of value, he stressed.
Spencer said that bitcoin has been functioning as money for over 10 years, to which Peter replied that his son was living in a “fantasy world” and not reality. Peter pointed out that bitcoin “is not a unit of account” because “you cannot find any prices fixed in bitcoin”.
“On rare cases when it’s [bitcoin] used in trade, the transaction is actually barter, not payment,” said the gold bug. He said bitcoin has not functioned as money, but only “a digital token that people collect and trade.”
For Spencer, mass adoption will qualify bitcoin as everyday money. Bitcoin has always divided opinion. In February, U.S. Treasury Secretary Janet Yellen criticized the digital asset as an “extremely inefficient way of conducting transactions.”
However, some analysts believe that bitcoin is starting to mature into a gold-like store of value. With its correlation to gold rising sharply over the past year, the analysts say BTC will eventually transition from a risk-on speculative asset to the crypto market’s version of the metal.
As digital gold, BTC appeals to the cashless internet economy largely on account of its characteristics that include round-the-clock price transparency, and the lack of limits, interruptions, or third-party oversight.