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Bitcoin ETF Nightmare: Peter Schiff Warns of Overnight Crash Lock-In

Last Updated March 22, 2024 10:43 AM
Teuta Franjkovic
Last Updated March 22, 2024 10:43 AM
By Teuta Franjkovic
Verified by Peter Henn

Key Takeaways

  • Peter Schiff argues that Bitcoin ETFs could increase the crypto’s vulnerability to crashes due to short-term traders.
  • His comments sparked a discussion within the crypto community about the benefits of self-custody compared to ETFs.
  • The debate highlights the differing perspectives on liquidity between traditional (gold) and digital assets (Bitcoin).

Peter Schiff, a well-known advocate for gold investments, has identified a concern with owning spot Bitcoin exchange-traded funds (ETFs).

However, the issue he raises is not exclusive to Bitcoin ETFs. This debate has sparked renewed interest in the concept of self-custody within the cryptocurrency community.

Gold Bug Schiff: Bitcoin ETFs a “Crash Waiting to Happen”

Peter Schiff, an economist and gold proponent, mentioned  an issue with the ownership of spot Bitcoin exchange-traded funds (ETFs).

Following a recent dip in the price of Bitcoin, Schiff expressed his concerns.

He stated :

“The more bitcoin that moves into ETFs, the more vulnerable bitcoin becomes to a catastrophic crash. That’s because ETF buyers are more likely traders than true believers. So if bitcoin is going up they’ll go along for the ride. But once it enters a bear market, they’ll bail out.”

This comment shows his apprehension regarding the potential instability introduced by the increasing presence of Bitcoin in exchange-traded funds.

Schiff Downplays Gold Liquidity Concerns, Analyst Disagrees

Responding to inquiries about the liquidity of physical gold, Schiff pointed out that gold does not experience overnight crashes, unlike BTC.

He added:

“There is nothing to worry about.”

In response to Schiff’s post, comments flowed in, including one from Bloomberg ETF analyst James Seyffart . He highlighted that the concern Schiff identified with recently approved spot Bitcoin ETFs is not unique to them but also relates to other ETFs, including those for gold.

Bitcoiners See Opportunity in 24/7 Digital Markets

Several Bitcoin supporters reacted to Schiff’s post by stressing the significance of self-custody and the advantages of purchasing Bitcoin directly, rather than through ETFs.

Simon Dixon, CEO and co-founder of Bank To The Future, agreed with Schiff  and noted an additional limitation: the inability to buy a Bitcoin ETF when the market is closed. He concluded that the key takeaway was the importance of owning actual Bitcoin whenever possible, highlighting that it is significantly easier than possessing physical gold without a custodian.

Entrepreneur Bryce Clark expressed his agreement  with Schiff, emphasizing the importance of self-custody for cryptocurrency. He advised against allowing third parties to hold one’s crypto, appreciating Schiff for highlighting this crucial point and thanking him for the warning.

Dave Weisberger, a proponent of digital assets for economic freedom, pointed out  that Peter Schiff, perhaps unintentionally, has highlighted yet another reason why traditional analog asset markets are destined to transition to digital formats.

He argued that markets operating around the clock, supporting multiple currencies, offering on-demand settlement, and utilizing on-chain value stores as the unit of account, are inherently superior and will inevitably be embraced.

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