The latest podcast on my feed is the Iced Coffee Hour with Peter Schiff.
As many probably know, Schiff is a massive critic of bitcoin while being a major proponent of gold.
I personally like both. But I think his arguments are asinine.
For one, he seems to miss that his argument about gold providing a store of value against inflation equally applies to bitcoin. He argues that gold has intrinsic value whereas bitcoin has none. And that bitcoin operates on a greater fool theory - that bitcoin operates on the notion that it relies on someone coming along to buy at a higher price. But stocks go up in value because the underlying company increased in value.
Let’s focus on the last argument - I guess he never heard of Gamestop? Or a short attack on an otherwise profitable company? While I think every investment is a degree of speculation vs value, and it could be argued that stocks are more closer tied to company value vs speculation, only a sixth-grader could believe that’s stock prices are based purely on company valuation.
In fact, there wouldn’t be much of a market if so.
He also made the classic mistake of comparing Bitcoin’s top in 2021 to its bottom this year and acting like that’s some kind of win, and not the evolution of an advancing but volatile asset.
So I’m picking apart Schiff’s poor argument, but I can’t help but notice I have become more Schiff like myself lately.
Some things that haven’t worked out in crypto the way I thought they might:
Gaming: Games seemed like the perfect use case for NFTs. You’re already buying digital assets, so why not make them immutable and tradable? What actually happened is gaming companies such as Gala Games started selling NFTs to games that didn’t exist yet, and then either never launched or launched in beta and remained in a perpetual beta state. (Townstar, which I played a ton of, is a classic example. In fact, a simple mechanic in which your asset shows ZZZs when it’s not in use remained broken for years.)
DeFI: It was one of my favorite use cases but I did the math and most of the time you lose more money in LPs in the underlying asset than you make in APR. I thought I’d found a winner with ALGO/USDC, but it was only lucrative when the Algorand Foundation was incentivizing it. Once that went away, it made little.
Real estate: I was excited about being able to own real estate fractional tokens. Get a bite of the real estate market without all the investment. It turned into a disaster. Automated market makers divorced the value of your tokens from the real price appreciation of the property. Many of them were mismanaged so the far less than half of my properties were paying rent. It was basically one giant loss.
And then there is the specter of altcoin season. I say specter because it was a ghost - we never quite saw the real thing. We got a bitcoin pump (which has been reducing every cycle) but not a real alt season.
All while we have an administration that is the most pro-crypto we’ve ever seen.
All this has me asking myself lately: Is the free lunch era of crypto over?
I’ve been in this space since 2017. I bought BTC, ETH and LTC after seeing historic BTC returns. They skyrocketed that fall/winter. I sold after they started pulling back and I started seeing euphoric behavior such as people taking out massive loans to buy BTC.
It’s occurred to me (especially after reading A Brief History of Financial Euphoria) that BTC cycles might just be euphoric phases, and with the shift away from retail investing to institutional investing, those cycles might be fading.
In other words, it was never really about the halving cycle of bitcoin - it was people’s narrative to the halving cycle, creating a euphoric surge that eventually collapses as all euphoric surges do.
So is Schiff right, even if he’s wrong?
I’m not so sure. I think bitcoin and crypto is evolving, and I am not sure what it is evolving into. But I am curious to see how it unfolds.
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