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Bitcoin Debate’s Defeated Bear: Digitized Gold ‘Only Type of Crypto That Can Succeed’

American stock broker Peter Schiff “technically lost” to ShapeShift CEO and crypto commentator Erik Voorhees in a ‘Bitcoin Debate’ at the SoHo Forum July 2.

The two financial thought leaders debated about the top cryptocurrency Bitcoin (BTC) and its underlying technology blockchain, questioning the potential for mass adoption, and comparing Bitcoin and other cryptocurrencies with other asset types such as fiat money and gold.

Voorhees, the Bitcoin bull of the debate, claimed that Bitcoin will eventually become a substitute for state-backed money, while government structures would be reorganized using blockchain technology. Voorhees argues that Bitcoin is “supremely good money” praising its provable scarcity, divisibility, durability, fungibility, portability, and decentralized nature, stating:

“Bitcoin will win because there is now competition in money, and Bitcoin is the best money currently available. Because it’s decentralized, it cannot be stopped.”

Voorhees noted that mass adoption will not happen right away or all at once, arguing Bitcoin will “simply, gradually come to be used as an occasional alternative to fiat.”

Defending Bitcoin bear position, gold investor and financial commentator Schiff argued that Bitcoin is not going to succeed in the future and work as substitute for fiat money since it is not backed by anything except the “confidence” of buyers, which is mostly driven by speculation.

Schiff spoke extensively on the value-creating characteristics of precious metal assets, namely gold, arguing that the fact that the U.S. dollar was once backed by gold is what allowed it to accumulate trust over time. Schiff argued that gold does not have to compete with any other asset, including Bitcoin, which is “replicating all of the properties of gold, except the most important one –– the metal itself.” Schiff’s argument for why gold is valuable as an element is based on the fact that it is rate and “has been valued as a commodity for thousands of years.”

Schiff, like many gold advocates on Bitcoin, expressed concern about the fact that it is not possible to find out how much Bitcoin is worth in terms gold or any other physical commodity:

“It has no real value into itself as a commodity, there is no way to relate the price of Bitcoin to the price of anything else.”

Continuing his argument, the investor claimed that the existence of multiple different cryptocurrencies was a weakness, stating “there is only one gold, there will never be another gold. Schiff noted there are, however, alternatives to Bitcoin, which, according to him, have “the exactly same properties [as Bitcoin]”:

“Now there are fifteen hundred or so cryptocurrencies that can do everything Bitcoin can do. Some of them can do it better, faster cheaper. There is no limit to the number of other digital currencies that can be created.”

Schiff concluded:

“If you want to go to the future, you have to go to the past. The future of money is gold.”

The stock broker explained that if a cryptocurrency were to be backed by gold, or “by real money,” then it would be the “only type of cryptocurrency that can succeed.”

Schiff, however, agreed with Voorhees about the weaknesses of the existing fiat monetary system, claiming that it is “not going to work.” However, the investor argued that Bitcoin “is not an improvement,” saying that it is still a “speculative asset” that people buy into in hopes of earning more fiat money.

At another debate in New York in April, U.S. venture capital investor and Bitcoin supporter Tim Draper argued that Bitcoin is “bigger than the internet,” as well as a number of other major developments in human history. During the debate, the investment mogul stated his oft-repeated prediction that five years from now, people buying coffee with fiat will be “laughed at” for not using crypto.

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Voorhees vs Schiff: Bull Meets Bear at NY Bitcoin Debate

A debate between an infamous bitcoin detractor and one of the cryptocurrency’s most well-known entrepreneurs made sparks fly in New York City Monday.

Hosted by the Soho Forum, a monthly Manhattan debate series, the event saw Erik Voorhees, the CEO of exchange service ShapeShift, argue that government-backed monies will eventually be replaced by bitcoin and blockchain innovations. The world’s largest cryptocurrency, he said, just needs gradual adoption to eventually triumph.

However, the debate was far from a one-sided showcase. There to represent the opposition, Peter Schiff provided more than a healthy dose of skepticism. Perhaps most damningly, he argued people are not currently buying into bitcoin or other cryptocurrencies to use them; they’re here to get rich, he said.

The economist said that bitcoin is primarily seen as a speculative asset. Moreover, even people who do plan to use bitcoin cannot do so easily.

Bitcoin is not, at present, a reliable store of value, he continued. Schiff pointed out that the price of a bitcoin can change hour-to-hour, which makes it difficult for people to price goods or negotiate contracts using the cryptocurrency.

“The biggest problem with bitcoin and why it can never be used as money is because [currency] has to be a reliable store of value, not just a medium of exchange,” he said.

Voorhees did not see market fluctuations as an issue.

He told the crowd:

“I remember when it was a big deal when bitcoin moved 50 percent. Today, it’s a big deal when it moves 10 percent. I think in a few years it’ll be a big deal when it moves 2-3 percent. While bitcoin is volatile today, I think this problem is self-correcting.”

Still, the event did see both provocateurs find common ground. Schiff, for example, doesn’t believe in fiat currency.

“The fiat system that we have now is not going to work,” but “replacing fiat currency with digital currency is not an improvement,” he said.

Gold or currency?

Another subject discussed was whether bitcoin can become a store of value to rival precious metals.

Touching on a familiar topic, Schiff trotted out the argument that gold’s long tenure in the market will make it hard to replace. Further, he argued it’s already surpassed its competition over the centuries.

“What are the odds that bitcoin’s the best cryptocurrency that’s ever going to be invented? … Nobody’s come up with a better gold,” Schiff remarked.

Here, Voorhees seemed to concede a bit to the argument, if on different grounds. Notably, he noted that the asset would likely be more susceptible to government bans than its more established competitor.

“Well, the government can absolutely outlaw bitcoin. More easily [than it would be to ban gold],” Voorhees said.

Elsewhere, Voorhees also conceded that bitcoin might not succeed in meeting all of the four classic functions of money.

In response to Schiff’s argument that the “crypto bubble will pop before the fiat bubble,” Voorhees acknowledged that consumers will likely ultimately play a role in deciding what kind of currency they want to exchange with, and whether it will be with cryptocurrency.

“The biggest obstacle to adoption is most individuals want governments to manage money for them. Until that changes, bitcoin will play second fiddle.”

No use?

But Voorhees did more than simply concede ground to Schiff.

In response to Schiff’s argument that the market is solely propelled by speculation, Voorhees noted that bitcoin can be used in cross-border transactions, is censorship-resistant and has a limited supply.

People transacting in bitcoin are also free of many of the restrictions seen in traditional financial institutions, including the fact that people cannot send wire transfers outside a bank’s business hours.

And an informal poll of the audience suggests this market may have won a few converts.

Soho Forum took a poll of audience sentiment before and after the debate, asking the audience if they thought bitcoin had a chance to beat government.

Notably, the yay votes rose from 40 to 55%, while the nay votes fell from 40 to 31%

Peter Schiff, Erik Voorhees and Gene Epstein image by Nikhilesh De for CoinDesk

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GoldMoney Integrates Bitcoin despite Peter Schiff’s Bubble Comments

Peter Schiff, a renowned investor, author, and financial commentator, who has consistently offered baseless condemnation on Bitcoin, has demonstrated why the demand toward Bitcoin and the cryptocurrency market can no longer be ignored.

On social media platforms, Schiff announced that GoldMoney, the parent company of SchiffGold, his gold businesses acquired in 2014, will be offering Bitcoin brokerage services to its clients. Schiff claimed that it is not an endorsement of cryptocurrencies but a response to the growing demand toward Bitcoin.

Bitcoin is not a bubble…

Throughout the past few years, Schiff has continuously described Bitcoin as a bubble. Schiff explained that Bitcoin was a bubble when the price of Bitcoin hit $2,000, $3,000, $4,000 and most recently, $5,000. In August, Schiff told Coindesk:

“There’s certainly a lot of bullishness about Bitcoin and cryptocurrency, and that’s the case with bubbles in general. The psychology of bubbles fuels it. You just become more convinced that it’s going to work. And the higher the price goes, the more convinced you become that you’re right. But it’s not going up because it’s going to work. It’s going up because of speculation.”

There definitely were bubbles in Bitcoin and cryptocurrency markets in the past. But, it is completely inaccurate to describe Bitcoin and the cryptocurrency market as bubbles. Schiff has always introduced the concept of intrinsic value to justify the superiority of gold over Bitcoin, but like any asset or currency, the value of Bitcoin depends on its market. Within the last eight years, the cryptocurrency market has become more liquid than the most liquid stock in the world, Apple.

Bitcoin is money…

Schiff fundamentally believes that Bitcoin is not money. By definition, money is a medium of exchange and the value of it should be dependent on the market and users. But, the value of government-issued fiat currencies are manipulated by central banks and were enforced against the will of the people, like the US government replacing gold with the US dollar. Whether Bitcoin is money or not, is not decided by the government or central entities. There are many users, merchants, and businesses utilizing Bitcoin as money, a digital currency, and a store of value. Hence, Bitcoin is money.

According to McAfee and Bank of Finland

As security expert John McAfee stated:

“It costs $1000 to mine one Bitcoin. What does it cost to print US dollar? Which one is the fraud?”

More to that, the Bank of Finland further emphasized in its research paper that Bitcoin is a decentralized financial network that cannot be regulated and censored by central entities, as it operates its own economy in a peer-to-peer ecosystem. It further encouraged economists to study the “marvelous” structure of Bitcoin.

“Bitcoin is a monopoly run by a protocol, not by a managing organization. Familiar monopolies are run by managing organizations, with discretion to determine and then change prices, offerings and rules. Monopolies are often regulated to prevent or at least mitigate their abuse of power. [Bitcoin’s] apparent functionality and usefulness should further encourage economists to study this marvelous structure,” read the Bank of Finland research paper.