Schiff is considered to be an expert on matters relating to investments, and particularly those associated with precious metal assets like gold. He's also been opposed to Bitcoin almost from day one – not necessarily because it isn't valid conceptually, but because it functions more like a get-rich-quick Ponzi scheme than like an actual store of wealth or form of currency. In Schiff's view, Bitcoin isn't really worth anything beyond what people think it's worth, and that one day this is going to become painfully apparent when enough people lose faith in it.
When it was first unveiled, Bitcoin was presented as an alternative to fiat currencies like the United States dollar, or Federal Reserve Notes, which are similarly backed by nothing. Where Bitcoin exceeds fiat money in terms of its viability is in the fact that there is a limited supply of Bitcoin. Once every last coin has been "mined," there are no more to be made, which from the start has created the illusion that Bitcoin will always be a solid store of wealth.
But as Schiff points out, Bitcoin is hardly the only cryptocurrency on the block. There are many other forms of cryptocurrency on the market today – and new ones seem to pop up almost daily. The blockchain technologies upon which they are built seem to be the wave of the future, but that's just it: As new cryptocurrencies are released all the time, so are updated and improved versions of the blockchain that work better, faster, and are more reliable than the one that holds the Bitcoin platform in place.
What this suggests is that, even though Bitcoin might be limited in quantity, there are endless possibilities for competing cryptocurrencies that could potentially supersede Bitcoin at any given point in time. Once this happens, Bitcoin's perceived value is likely to plummet, and anyone left holding Bitcoin, especially if they purchased during one of its "highs," will end up losing out big time.
"Bitcoin is limited in supply, unlike dollars and euros that are unlimited, but there's an unlimited supply of other cryptocurrencies that can be created that are as good or are identical to Bitcoin, or maybe will even be better," says Schiff. "So I don't think that the currencies are going to work, but they have made a lot of people – certainly the people who have cashed out."
Schiff refers to this cashing out as paper profits, and admits that many people have made it rich from them. But this won't last, in his opinion, and in the end many of these paper profits could "vanish" if the people who are still holding onto Bitcoin in the event that it collapses don't sell what they have and move their wealth somewhere else.
"At the end of the day, I think it becomes a zero sum game," Schiff adds. "The people who make money on Bitcoin, those gains will come at the expense of the people who lose money, just like any kind of pyramid or Ponzi scheme – somebody gets caught holding the bag, and it's the bag holders that end up providing all the profits for the people who got in early and who cashed out."
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