Economist and long-time Bitcoin skeptic Peter Schiff has issued a strong warning against the U.S. government creating a Bitcoin reserve, describing the idea as an “unmitigated disaster” that could lead to hyperinflation and financial collapse.
Schiff’s comments were made in response to recent discussions, led by pro-crypto figures like RFK Jr., about the possibility of the U.S. government acquiring a significant Bitcoin reserve.
In his latest statement, Schiff proposed a theory that if the U.S. were to purchase 1 million Bitcoins, such a large purchase would drive Bitcoin prices to unprecedented levels. According to Schiff, this would prompt current Bitcoin holders, who are currently worth “millions or billions,” to sell their holdings, triggering a destabilizing cycle in which Bitcoin prices would plummet. In order to stabilize the market, the U.S. government would then be forced to buy more Bitcoins.
“To prevent the price from falling, the U.S. will have to print more dollars to continue buying Bitcoin,” Schiff said. He predicted that this constant buying would devalue the dollar and result in an inflationary spiral that would erode the currency’s purchasing power. “A reserve of something that cannot be sold and requires constant buying is worthless as a reserve,” Schiff cautioned, adding that such a policy would likely lead to hyperinflation and render the dollar “completely worthless.”
Schiff also noted that the collapse of the dollar would eventually compel the government to sell its Bitcoin holdings to cover national spending. He warned that this mass sell-off could cause Bitcoin itself to collapse, leading to the complete loss of savings for those holding Bitcoin or dollars.
While some proponents, including influential crypto advocates, see a U.S. Bitcoin reserve as a step towards modernizing the financial system, Schiff’s analysis presents a completely different scenario. Schiff believes that the U.S. government is unlikely to adopt such a policy due to the potentially catastrophic economic consequences.
*This is not investment advice.