Peter Schiff Explains Why the "Bitcoin Bubble" Is About to Pop

The worst thing that could happen now for bitcoin is a correction in the NASDAQ and a new high in gold.

You have been proven wrong multiple times regarding your predictions on this matter.

I don't think I've been wrong for these last few years. If you wait for the bond market to crash, well, I mean, it's pretty much all over now, right? What are you going to do then? It's too late. Right. We need to act quickly before the whole thing completely implodes, which is going to happen.

I saw that you just posted a tweet where you were saying that bitcoin is actually a bubble and it is about to burst. So I think that you have been saying that for many years already, and it has become like a sort of a meme. You have been proven wrong multiple times regarding your predictions on this matter. Do you really genuinely believe that bitcoin is a bubble and why?

Yeah, well, first of all, I don't think I've been wrong for these last few years. I mean, bitcoin is more than 20% below where it was four years ago if you price it in gold. So four years ago was really the top. Bitcoin marginally took out that high in 2024, after Trump won the election, we had this big spike and bitcoin got slightly above the price that it hit in 2021, but barely, maybe by a percent. And, you know, now it's considerably lower. In fact, even when bitcoin hit its nominal new record high last month, when it got above 126,000, it still was below where it was in 2021. If you priced it in gold. And, you know, now it's in a bear market. It's, as I speak, it's still about 11 and a half percent below the high from three weeks ago. But what I'm pointing out now is that bitcoin is not rallying with the Nasdaq. You know, the Nasdaq is at another new record high today. Bitcoin has been very correlated to the Nasdaq, and I believe that that correlation will continue. So if we end up getting a pullback in the Nasdaq, which is long overdue, if bitcoin's not going up when the NASDAQ goes up, I believe that when the NASDAQ goes down, it's going to be extremely weak. Also, bitcoin is negatively correlated with gold. And we just had a significant correction in the price of gold. Gold went from almost 4400 down to 3900. So a 10% drop in the price of gold and bitcoin fell. It initially caught a bit of a bid when gold broke the first time, but then it lost that rally and has now surrendered the entire rally. So bitcoin is not rising when gold goes down, but it will go down, I believe, when gold goes up. So I think the worst thing that could happen now for bitcoin is, is a correction in the Nasdaq and a new high in gold. So if that happens, I think bitcoin is going to just get demolished. We'll see how low it goes. But yes, you know, I was wrong 10 years ago, 15 years ago, in that I didn't buy bitcoin as a gamble because obviously, with the benefit of hindsight, the gamble paid off dramatically. I don't think I was wrong in my characterization of bitcoin. It hasn't changed since I first found out about it. I mean, all that's happened is more people believe in it, but they believe in a lie. Right. It's a fraud. But yes, now there's a lot of people that are convinced that nothing is something, you know, But I think they're running out of fools who are going to take that leap of faith. And you need an ever increasing supply to maintain the dynamic. And I think as you start running out of new converts, the price starts to fall. But eventually, as the price really starts to fall, some of the believers will come to their senses and stop believing. And that's when bitcoin is going to have a much bigger problem.

You at least can admit that bitcoin will not go to zero because there will always be a bedrock of holders that will continue holding all the way down.

Well, always is a long time. So I do believe that eventually bitcoin will be at zero. But yes, I agree that it may take a long time to get there. I mean, 10 years from now, 20 years from now, there could be some people still gambling with bitcoin. I don't know. But I think for all practical purposes, the price will be close enough to zero.

So you have been criticizing bitcoin because its value is based on people's beliefs. But I could make the same argument for gold. So the overall majority of the value of gold derives also from a belief system and not from the metal industrial properties of gold.

No, I mean, you. Look, you could try to make that argument, but you would be wrong in claiming that gold has no value or no use. It is objectively the most useful metal that exists. It has properties that no other metal has and therefore it has more uses than any other metal on earth. The only reason that gold is not used more often is because it's too scarce and too expensive. But it is certainly the most useful metal on the periodic table. And if you appreciate the properties that gold has that make it so unique and that make it so valuable and why it has been valued for thousands of years. Right. It's not an accident that gold has been around for so long and has maintained its purchasing power over the centuries. It's not about just our irrational belief system. Gold objectively has value. You could dispute how much value, but it has value as a rare precious metal that has properties that allow it to be utilized in so many different industries. And the fact that it's also used as money, and the fact that central banks hold it as money, yes, that is yet another use for gold. But without the underlying value as a precious metal, it would have no value as money. It could not serve as a store of value if there was no underlying value that was being stored. See, that's the problem with bitcoin. You don't store anything. You have bitcoin, you've got nothing. Now, yes, bitcoin has a price because somebody's dumb enough to buy it. But that doesn't mean the price is gonna be there in the future because you cannot store price. You can only store value. And bitcoin doesn't have that. But one of the reasons that I think it's still going on is the bitcoin community has got Wall street in on it and now the US Government. So they're pushing the envelope and casting a wider net. And so they're getting more people suckered into this whole thing. So there's been new buyers to keep it going. But even Wall street and even the Trump administration, there's a limit to how big they can make this. And we may have already reached it. I don't know.

Bitcoin and gold are seen both as part of this so called debasement trade, which basically favors scarce asset versus fiat currency, the debasement of fiat currency. And you are also a supporter, a believer, an advocate of this debasement trade. There is some criticism around it. Especially I was looking at an analyst at Reuters. If investors truly believed that the dollar was being debased through reckless fiscal policy and Fed cuts amid persistent inflation, then treasury yields would be spiking and the dollar collapsing. While this is not really happening, what would be your counter argument to that?

Well, first of all, I mean, I've been doing the debasement trade for 25 years. So, and, and I, when I started buying gold, when it was under $300, I bought it specifically because of the expectation that the US currency would be debased, it would depreciate. And that's exactly what has happened. And I think the trade has got a long way to play out. I think the dollar is going to lose a lot more value in the future than is already lost in the past, which means the price of gold is going to go much higher. You're going to need a lot more dollars to buy an ounce of gold. Now if people are making that trade and buying bitcoin, I think they're, I think they're doing the wrong thing. I think they've got the right idea. They need protection from a weak dollar. I just don't think bitcoin is going to provide it. Now, as far as the observation that, you know, if there really was a loss of confidence in the dollar, then we would see a big drop in the dollar, not just against gold, but against the euro or the pound or the yen, and we would see it in the treasury market. Now my answer to that is, well, first of all, there's not a lot of confidence in the pound or the euro or the yen either.

Right?

And so investors are losing confidence in general with fiat money. And so everybody is buying gold. So it's not simply that people are worried about the dollar, they're worried about other currencies too. But I do believe that, that at some point you will start to see more pronounced dollar weakness, even against other fiat currencies. In fact, in the first half of this year, the dollar dropped about 10% and it was off to its worst annual start in like 50 years. So that's some indication that you're seeing the confidence in the dollar erode more than in other fiat currencies. But I think that by next year you're going to see a much weaker dollar on foreign exchange markets. And so that will be happening. Now as far as the bond market, we've already seen that because if you recall the last time the Fed cut rates and they cut rates before they started this new cycle. They cut rates by about 75 basis points and long term rates went in the other direction by the same amount. And very few people expected that. They thought when the Fed cut rates, bonds would rise. Instead, bonds went down. I think that was a indication of an erosion of confidence in the world in the US Government's ability to repay its debts and to service its debt. So I think we've seen it in the failure of the bond market to rally. We haven't seen like a big crash in the bond market yet. But the bond market hasn't rallied the way a lot of people would have expected. And I think that's coming. So I think the people that are complacent about $4,000 gold and who think, hey, there's nothing to worry about because we haven't seen a dollar crash yet against the euro or the yen, or we haven't seen the bond market crash, those things are going to happen. But the problem is if you wait for that, if you wait for the dollar to collapse on foreign exchange markets, if you wait for the bond market to crash, well, I mean, it's pretty much all over now, right? What are you going to do then? Right? You have no time to prepare for it. You have no time to maybe adjust course and try to prevent it. It's too late, right? People should be looking at the early warning sign of the price of gold and say, wait a minute, this is a reflection of a loss of confidence, or we need to act quickly before the whole thing completely implodes, which is going to happen. And the fact that nobody is heeding the warning of gold is why it's inevitable that the crisis is going to happen, because nothing is being done to try to prevent it.

The US Government has been actively supporting the crypto industry and bitcoin in particular. And therefore you said in a tweet that basically, yeah, it's the consensus trade that is going to blow up soon. While, quote, you said hardly anyone owns gold. That sounds a little bit strange to me because to me, it is gold. That the incumbent, while bitcoin is the underdog, while here you are trying to swap the two roles. I mean, Bitcoin is 10 times smaller than gold. Don't you think it's unfair to say that hardly anyone owns gold?

Well, when I say hardly anyone owns gold, I'm not counting gold jewelry or gold that's in your cell phone, for example. So if you count people who own gold as a metal, almost everybody owns some gold, Right? But I'm talking about buying gold as a store of value, buying a gold coin or, or gold bar, right, as an investment. And there hardly anybody is doing that. A very small fraction of investors. I would say that probably more Americans have bought bitcoin as an investment over the last several years than have bought gold. And it's probably not even close in raw numbers. But what I was pointing out with that post is, you know, I've Been in the investment business for, you know, over 35 years. And I've seen a lot of bubbles where people are really wedded to their conviction in a particular trade, whether it was with the dot coms or real estate. But I've never seen people more convinced that they can't lose and that not only is what they own going to go up, but it's going to skyrocket, you know, 10x50x100x. And that is the people who own bitcoin. So they have, they're more convinced than, than anybody that they can't lose in the trade. And when you see that kind of conviction, it's usually wrong. When people are that arrogant and that convinced that they can't possibly lose, right. They end up losing. And also, if you look at the investment case now for bitcoin, if the US Government is now behind bitcoin and pushing money into bitcoin, using the power of the presidency, and not just the president, but a number of congressmen and senators are now in the pocket of the crypto industry and they are trying to shape policy to direct capital and resources into crypto, right? Not so. This is not the free market saying we should put money in crypto. This is the government using the power, you know, of, you know, force and regulation and, you know, everything to get people to get into bitcoin. Talking about the US Government using taxpayer money, selling our gold, buying bitcoin. And then when you have the President's family completely all in on crypto, I mean, forget about real estate. The Trump family is now the crypto family. I mean, they've made more money on paper in crypto since Trump was elected than they've made all throughout their history in real estate and the Apprentice or, you know, whatever they did, they've made more money. And so people think, how can this not work? Because the President wants to enrich his friends and his family, and he's going to make sure that bitcoin goes up, right? So you've got, you've got all this out there that everybody knows. Everybody. There's nobody in the financial media that's bearish on bitcoin. Everybody concedes it can only go up.

Let's think about an average investor, right, is looking for alternative investments and looking into gold and into bitcoin in case your outlook doesn't play out and bitcoin becomes the new gold, then you will have missed out tremendously on this trade. So don't you think that your position is a little bit too maximalistic for an average investor, and it would be better to have both.

Well, first of all, I think there's zero chance that bitcoin will become the new gold. So I think it's irresponsible to own any of it. But if I could turn back time and when I first learned about it in 2010, and I thought that, hey, maybe this will catch on, maybe people will buy this instead of gold. I remember thinking about that and I thought about buying it, like, maybe I should buy some as a hedge, because I got a gold business. What if a bunch of people are dumb enough to actually buy this? Maybe I should buy it now just in case. So I. I did think about it then, when hardly anybody knew about it. And at that point, sure, I could have thrown ten grand at it and it'd be a billion now, whatever. So it may have made sense at that time to just put a little money as a hedge. But based on where it is now, based on the fact that, I mean, there's nobody that doesn't know about bitcoin. I mean, Wall street has embraced it, the president has embraced it. I mean, you go to these bitcoin conferences. You know, I was at one in Vegas. There were 35, 40,000 people there. I'm going to a gold conference next week. There won't even be a thousand people at that conference. And that conference has been going on for like 50 years, or 25, you forget. But I mean, so the number of people who are interested in and enthusiastic in owning bitcoin is skyrocketed. So at this point, you know, I said it's the consensus trade. There's a lot more that can go wrong with bitcoin than can go right. I would much rather take money that I would have put in bitcoin and buy gold and silver mining stocks. You know, I think if I'm going to gamble on something and I look at mining stocks as more of a gamble as opposed to just physical precious metals. But if I'm going to gamble, that's what I want to put my chips. I just think the upside potential is so much greater than in these mining stocks than it is in bitcoin. I mean, could bitcoin double from here? I suppose it could, but that's not a big enough move to even be of interest to me compared to the fact that I think mining stocks can go up five times, 10 times more. Even the smaller ones on the other side, bitcoin could collapse by over 90%. I don't think that's gonna happen with mining stocks. So I think I've got less downside risk in mining stocks and a lot more realistic upside potential.

I saw a post where you were saying that the smart money is actually already selling Bitcoin and that the trade is basically over. So what I wanted to ask you is what do you make of these headlines that we have here? So Morgan Stanley drops crypto fund restrictions for wealth clients or this other one, JP Morgan allows bitcoin and ether as collateral. So these are just two headlines of signs that the institutional interest of Bitcoin is actually opening up. So doesn't that signal increasing adoption for the future rather than an exit? No.

You know, Wall street has a pretty checkered past when it comes to bubbles. They were big buyers. Those firms were big buyers of subprime mortgages at the peak. They didn't see any risk in the mortgage market leading up to the 0708 crisis. A lot of those big banks would have failed if it wasn't for the bailouts by the US Government with TARP and other programs. So Wall street is just about making a buck. Right? And so if the ducks are quacking, they're going to feed them that, that, you know, that's how the main Wall street firms operate. So yes, if there's a feeding frenzy, if people want to spend money on crypto related investments or tokens, Wall street will make money selling those investments, managing those investments. You know, they're making a lot of money underwriting companies, IPOs, secondaries, all these offerings in crypto related industries. So yeah, there's a lot of money. Wall street, they don't care what ultimately happens. As far as they're concerned, all these companies can go bankrupt, all these investors could lose money. It's like a casino operator, like I'm operating a casino and you know, the house wins. But all the people who are gambling are going to lose. The problem is at least when you go to a casino, you know, you're gambling. You know, but a lot of people that are buying bitcoin and other crypto, they don't realize it. You know, in fact they think they got a sure thing. They, they think they can't lose, that they're going to be in for a rude awakening. And I do think at the end of the day there's going to be a lot of lawsuits. I mean the lawyers always win, right? And what's going to happen is a lot of Americans are going to lose a lot of money and they're going to be looking for somebody to blame and they're going to be looking for a way to get some of what they lost back. And that's where the lawyers are going to come in.

According to you, the debasement trade is still in the. In an early stage, Right. We are not at the. We are not at the peak.

Correct. Right. I still think the lion's share of that trade is in front of us, and very few people have put it on yet. I think Wall street just started to figure this out in the last few months, and so I think it's going to be more broadly adopted throughout Wall Street. I think you're going to see more portfolios start allocating something to gold, whereas they've allocated nothing in the past. And so as they start allocating something to gold, that's going to benefit gold and it's also going to harm whatever it is they're selling to buy the gold. And I think in many cases, investors will be selling bonds, they'll be selling Treasuries and other fixed income investments. And so that will help push yields up, which may also put more pressure on the Fed to print more money to buy bonds to stop yields from rising, which will just accelerate the debasement trade and the exodus out of dollars and into gold.

Peter, it was a wonderful conversation. Thanks a lot for coming on our show and I hope to see you soon.

Yeah, thanks for having me.