Peter Schiff: Bitcoin Merchants Will Hurt the Price

January 23, 2014 14:00 UTC
Peter Schiff doesn’t see the value of Bitcoin.

If you’re going to take financial advice from Peter Schiff, then bitcoins won’t be found in your portfolio. Last night, Schiff sat down with Joe Rogan to talk about everything from how Libertarians would protect the environment to whether or not the US Federal Government should raise the minimum wage. For our readers, the most interesting point in the night came when Rogan brought up the topic of Bitcoin. Many people know that Peter Schiff is one of the few Libertarians who does not care for cryptocurrency, so it wasn’t a surprise when he claimed that bitcoins have no “intrinsic value”. Although his long term view on the currency didn’t offer anything new, there was one point Schiff made about Bitcoin that actually made a lot of sense.

Moving Bitcoins Into Weaker Hands

Many Bitcoin enthusiasts have talked about how merchant adoption is going to increase at a rapid pace in 2014, and this prediction will probably turn out to be correct. As more stores, restaurants, and other businesses accept bitcoins for payments, many people in the Bitcoin world are expecting the price of bitcoins to increase along the way. In reality, this could be the opposite of how things work out. Since most newcomers to the Bitcoin world are not going to want the added risk of holding bitcoins, they will likely use a service like Bitpay or Coinbase to immediately exchange those bitcoins to dollars. This creates an interesting situation where bitcoins are basically moving from the hands of Bitcoin enthusiasts into the hands of people who want to sell right away. This means many of the bitcoins used to purchase goods at and other retailers will actually be sold on the exchanges. Although merchants are not a big part of the exchange market right now, that could change when someone like eBay or Amazon gets into the mix.

Creating a Stable Price?

I’ve written about why the price of bitcoins will soon become less volatile, but I didn’t factor this side effect of merchant adoption into the equation. One thing to remember about avid Bitcoiners is that they’ll usually replace the bitcoins they use for purchases with new bitcoins bought on an exchange. Then again, the people who are willing to part with their bitcoins for goods or services in the first place are probably not in it for the long haul. Merchant adoption seems to be a phenomenon that will help stabilize the price more than bring it back down to a lower level. Adoption by the general public is still growing at an exponential rate, so my view is that merchant adoption will help stabilize the increased price of bitcoins over the course of 2014.

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Last modified: April 20, 2014 18:28 UTC

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