Peter Schiff doesn’t like bitcoin. He gets really happy whenever the price of the flagship cryptocurrency takes a hit. In fact, the market bear does not let go of any opportunity to take a swipe at the crypto asset, hoping that his actions will bring more hurt to cryptocurrency enthusiasts. His latest ploy to bring down bitcoin is comparing the cryptocurrency to pot stocks.
Schiff, who is the CEO of Euro Pacific Capital, says that bitcoin will eventually follow the path of pot stocks. He believes that the rally in pot stocks seen earlier this year was driven by speculators, who were also buying the crypto asset.
The pot stock rally went bust in recent months. This is evident from the sharp decline in the U.S. Marijuana Index over the past six months.
This decline in marijuana stocks has led Peter Schiff to believe that bitcoin will face a similar fate as speculators try and cut some of their losses by selling the crypto asset before it gets too late. However, there isn’t much merit to Schiff’s view, as finding a correlation between pot stocks and bitcoin is akin to looking for a needle in a haystack.
The first reason that defeats Peter Schiff’s theory that a bitcoin price crash will follow the pot stock crash is that both asset classes are not correlated. In fact, research proves that bitcoin’s direction does not depend on stock market action.
There was a time experts believed that bitcoin had the potential to thrive when the stock market remained under duress, believing that the crypto asset is capable of replacing gold.
But that theory has been debunked already, and also, there is not enough data to suggest a correlation between the stock market and bitcoin. As such, it doesn’t make sense to force a relationship between pot stocks and bitcoin, like Schiff is trying to do.
On the other hand, Schiff’s assumption that those buying bitcoin and pot stocks are speculators doesn’t seem justified. After all, the daily volatility of bitcoin has nosedived to less than 2 percent, as per BitMex. This should encourage more institutional investors to pour their money into the crypto asset, and the same seems to be happening already.
Meanwhile, pot stocks have lost Wall Street’s backing; the marijuana bubble has burst as legalization has hit a roadblock, while illegal sales and taxation have turned out to be some more pain points.
This is where bitcoin is different than marijuana and pot stocks. The cryptocurrency is not dependent on any government approval thanks to its decentralized nature. Moreover, unlike marijuana, bitcoin is a medium of exchange that allows people to send money from one place to another.
However, the likes of Schiff would have you believe that bitcoin is a speculative asset even when that’s not the case. This is why crypto enthusiasts should ignore Schiff’s warnings that a crash will follow the pot stock meltdown, as there’s a big difference between the two assets.
Last modified: January 11, 2020 2:31 PM UTC