Peter Schiff Blames Altcoins for Bitcoin’s Fall as Ethereum Merge Nears
The cryptocurrency industry shed a trillion dollars in market in the recent months recently as Bitcoin cracked below the important $20K level. Financier and contrarian investor Peter Schiff says fierce competition from altcoins is taking its toll.
Less than a month ago, the Bitcoin price was soaring above the $23,000 handle. The cryptocurrency’s precipitous fall over the remainder of August through this week knocked some 20% off its total market capitalization.
Peter Schiff Has Something to Say
Schiff Gold Fund CEO and Austrian economist Peter Schiff says the original cryptocurrency is losing market share to competing altcoins.
“Not only is #Bitcoin crashing, but its dominance has fallen to 38.1%, its lowest since June of 2018. Competing with almost 21,000 other intrinsically worthless digital tokens, NFTs and #crypto related equities is taking a toll. Even if Bitcoin is scarce, its alternatives are not.”
Not only is #Bitcoin crashing, but its dominance has fallen to 38.1%, its lowest since June of 2018. Competing with almost 21,000 other intrinsically worthless digital tokens, NFTs and #crypto related equities is taking a toll. Even if Bitcoin is scarce, its alternatives are not.
— Peter Schiff (@PeterSchiff) September 6, 2022
Several commentators on crypto Twitter were quick to strike out at Peter Schiff’s claims. Even his own son Spencer Schiff took issue with the elder his contention that all the competition in the crypto markets is swamping Bitcoin.
It’s true that many new cryptocurrencies don’t have the Satoshi blockchain’s notorious supply cap of 21 million coins. But Bitcoin doesn’t necessarily compete with its peers in the cryptocurrency sector. The fast-growing market for cryptocurrencies offers a variety of different virtual financial services.
Moreover, as Peter Schiff pointed out himself, not all of Bitcoin’s peers offer users a currency based in part on the economics of digital scarcity. So they aren’t really competing for the same users or their dominant user motivations and values.
Ethereum Merge Could Radically Recalibrate Investor Perceptions
Independent crypto analyst and researcher Kyle MacDonald supports Schiff’s thesis. Competition from altcoins is eating into Bitcoin’s market share. The imminent Ethereum merge poses a serious threat, MacDonald recently told CoinDesk:
“The ethereum [upgrade] isn’t just about ethereum. I think after the merge, investors and regulators are going to realise that [bitcoin’s] proof-of-work was never really necessary and we’re slowly going to see a huge crash in the bitcoin price.”
Along those lines, Peter Schiff might be right. It certainly stands to reason that Ethereum’s success post-merge would spell an existential challenge to the older cryptocurrency. Bitcoin is predicated on the value of digital scarcity maintained by a proof-of-work consensus mechanism.
Bitcoin’s PoW algorithm requires network participants to spend electricity solving U.S. NSA SHA-256 hash problems to qualify as participating nodes. That maintains honest participation in keeping up the blockchain and allows decentralized collaboration between network peers that do not know each other.
An alternative theory for the Bitcoin price crash over the past 30 days is the growing correlation between crypto and stock prices. While Peter Schiff has a credible argument about the threat of competition Ethereum poses, the crypto-stock correlation has been a persistent trend for over a year now. That’s almost certainly a significant factor in bitcoin’s recent price movements.
I’m a journalist who specializes in investigative reporting and writing. I have written for the New York Times and other publications.