A financial commentator warned that Bitcoin could potentially weaken the US dollar if the government would intervene in the cryptocurrency.
Economist Peter Schiff believes that if the American government decided to adopt the firstborn crypto, it would have an adverse effect on the greenback by inflating the money supply.
Unforeseen Consequences
Schiff, who is a known Bitcoin critic, said that there will be unforeseen consequences on the value of the US dollar once the US government continues its plan of intervening in the Bitcoin markets, which could lead to an unsustainable economic bubble.
The financial commentator believes that the surge in Bitcoin price is largely fueled by government intervention, saying that it might have a negative effect in the long run that could eventually lead to the collapse of the global currency.
In a post, Schiff argued that the cryptocurrency could destroy the US dollar because the government adopted it.
Ironically, #Bitcoin may end up destroying the dollar after all—not because it replaces the dollar as a global reserve currency, but because the U.S. government embraces Bitcoin, prints trillions of dollars to buy it, and fuels a larger bubble that squanders the nation’s wealth.
— Peter Schiff (@PeterSchiff) December 5, 2024
“Ironically, #Bitcoin may end up destroying the dollar after all—not because it replaces the dollar as a global reserve currency, but because the US government embraces Bitcoin, prints trillions of dollars to buy it, and fuels a larger bubble that squanders the nation’s wealth,” Schiff remarked.
According to him, a large-scale crypto adoption by the US government would mean buying Bitcoin with newly printed currency which could potentially inflate the money supply, adding that the US might end up in a large-scale economic bubble.
He added that such crypto intervention could also diminish the confidence of investors in the US currency.
BTCUSD trading at $99,325 on the daily chart: TradingView.com
Political Lobbying
Schiff argued that the exponential growth of Bitcoin which allowed it to go beyond the $100,000 mark is not driven by organic market demand, saying that the crypto reached that milestone because of political lobbying and government support.
It’s ironic that #Bitcoin only hit $100k by buying off politicians and getting in bed with government. Without expected government intervention, this milestone never would have been hit. What couldn’t be done in a free market was achieved through the cohesive power of the state.
— Peter Schiff (@PeterSchiff) December 5, 2024
“It’s ironic that #Bitcoin only hit $100k by buying off politicians and getting in bed with the government,” Schiff said.
As an economist, Schiff worries that a government-backed momentum on the alpha crypto could be leading the US to the path toward an economic bubble.
He said that Bitcoin might not have reached $100,000 per coin without the government’s influence.
“Without expected government intervention, this milestone never would have been hit. What couldn’t be done in a free market was achieved through the cohesive power of the state,” he explained.
Criticizing The Proposed Bitcoin Reserve
Schiff lambasted the proposal to establish a national Bitcoin reserve, arguing that buying large amounts of BTC might destabilize the dollar.
US President-elect Donald Trump has been proposing the creation of a Bitcoin reserve which Schiff said is a proposal that will require the US government to buy large amounts of the crypto every year. He predicted that the US might end up holding 1 million Bitcoins.
The financial commentator said that the US might be pushed to sell its gold reserves to finance its purchases of Bitcoin to build up its reserves.
He warned that it could lead to a financial crisis because it might give an impression that BTC is more viable than the US dollar, adding that it will diminish the global dominance of the US dollar because investors will lose their confidence in the currency.
Featured image from Pexels, chart from TradingView