Why Peter Schiff Is Wrong About Bitcoin And Inflation (Opinion)

The world's leading cryptocurrency is trading 40% above its average value on the eve of the November 5th US election.

Analysts agree that this is largely a promise by the Trump campaign and its allies to ensure that the federal government is fair to the fledgling Internet industry. But it's also repeating a historical pattern in Bitcoin's 4-year market supply cycle.

Arch Invest's Kathy Wood recently doubled down on her 2030 Bitcoin price target. Last week, she told a CNBC audience that if history keeps repeating itself, BTC will trade at $1 million by 2030.

He says the blockchain money industry is good news for the economy as well as the secure internet coverage they are building for financial transactions. But not everyone agrees.

Peter Schiff sheds light on Web3 Macroeconomics

The more Americans misallocate to #Bitcoin and #crypto-related businesses, the less resources we have to do the things we need. The end result will be a large trade deficit, a weak dollar, high inflation and low living standards.

— Peter Schiff (@PeterSchiff) November 20, 2024

Peter Schiff, founder and chief strategist of the Euro Pacific Macro Hedge Fund, said in a post on X Wednesday that spending money on Bitcoin is a “wrong idea” that could lead to a slowdown in the economy. Classification”. Schiff added that large trade deficits, a weak dollar and low GDP are the health of Bitcoin's regime.

In another post on Wednesday, Schiff said that while investors may use cryptocurrencies as a hedge against dollar inflation, bitcoin will be an incredibly inflationary source.

It's funny how many people buy #Bitcoin to hedge against inflation and a weakening dollar. Now, if the US government actually buys Bitcoin, and turns more of our scarce resources into crypto, Bitcoin itself becomes a source of further inflation and dollar weakness.

— Peter Schiff (@PeterSchiff) November 19, 2024

How Bitcoin can help the Fed do its job

Schiff may be floundering in inflationary terms. It is an unforgivable mistake. Bitcoin's role in the ecosystem is still very new and difficult to understand, even for an economist as competent as the founder of Europac.

Rising business and consumer spending from low dollar environments is driving inflation as cryptocurrency users use Bitcoin to protect and grow their wealth. An increase in the value of BTC represents the inflation of the dollar and the relative appreciation of Bitcoin.

(BTC is inflation-adjusted, but much less than the dollar when the Federal Reserve depreciates.)

So, will further investments in Bitcoin worsen the trade deficit with China and US dollar inflation while slowing down new goods and services that people use the money to buy?

Every dollar that is sent to China for import into Bitcoin helps to balance the trade deficit. Meanwhile, Bitcoin is not the cause of dollar inflation; The Federal Reserve increases the supply of dollars to target lower borrowing costs.

In the year After unraveling the financial crisis in 2008, the Fed became increasingly concerned that the money supply was out of step with GDP. The resulting inflationary risk is a reduction in the value of debt that can tip the economy into an intractable depression.

Bitcoin supports the central bank in this regard by locking up abundant savings in the digital economy, encouraging participants to “hoddle” and not spend their surplus income.

If they're spending all that crypto market capital gains, inflation, ceterus paribus, can make it difficult for families with fixed incomes to manage.