Wealthy Traditionalists: Why Are They Howling About Bitcoin?
What do gold bug Peter Schiff, banking executive Jamie Dimon, and epic investor Warren Buffett all have in common? As Bitcoin continues its meteoric rise, they all seem to be howling like wolves these days, agitated by new world order of digital currency that threatens to topple the prevailing winds of traditional money. Their goal; to squash crypto’s growing presence and threat by marginalizing and trashing it.
The latest to join this chorus of detractors is Thomas Peterffy, founder and chairman of futures commission merchant and broker-dealer Interactive Brokers LLC. Reputed to be the richest person in Florida, he claims that Bitcoin will destabilize the global economy.
Highlighting his concern, Peterffy in an unprecedented move took out a massive full-page Wall Street Journal advertisement on Bitcoin to state his case. In an open letter, Peterffy asserts that Bitcoin is a very serious threat to prevailing economic dynamics particularly because the US economy is at a critical tipping point. His views as well as those of his cohorts appear to underscore a disdain by the wealthy relative to Bitcoin’s influence, given their lack of control over its direction.
Peterffy’s full-page newspaper ad is viewed by many in the Bitcoin community as a wild shot-in-the-dark, an attempt to diminish the growing repute of the cryptoasset world. His ad, in fact, claims there’s no foundational model on which Bitcoin is valued. While this very common argument may hold some truth, it also applies to futures contracts, fiat money, and other traditional monetary systems prevailing in the world today.
It’s fascinating to observe how traditionalists like Peterffy, despite their repute, are finding their arguments continually throttled by Bitcoin’s steady rise and sustainability. Moreover, he doesn’t propose a viable alternative, choosing instead to tout Bitcoin as nothing more than pixie dust that he hopes will magically disappear once and for all.
Jordan Valentine, an Associate in the emerging technologies division of Spitzberg Partners, says that on the surface, Peterffy’s dramatic statement appears a bit hyperbolic. However, says Valentine, he does identify legitimate causes for concern about the clearing of cryptocurrencies. “Bitcoin, in particular, is notably prone to wild and seemingly irrational price fluctuations. It is not hard to conceive of a swing that leaves short sellers unable to cover. To its credit, CME has publicly recognized the risks associated with such volatility and promises to introduce mitigating measures, including a 30 percent collateral requirement,” says Valentine in a series of email comments to BTCManager.
Valentine notes that more and more institutional players are now racing to get involved with cryptocurrencies. He says that while this is an encouraging sign that the sector is building mainstream credibility, we should remind ourselves that this space is still quite far from maturity. “Predicting value for the multitude of digital assets entering the market is often more art than science. Going forward, as cryptocurrencies continue to enter into the world of conventional finance, it will be important to err on the side of caution; a high profile failure could seriously hamper the pace of public adoption.”
“For an individual with a net worth of $13.8 billion, such comments regarding Bitcoin seem petty at best. While he is entitled to his opinions, they don’t make much sense when looking at the bigger picture. If a Bitcoin bubble were to occur, it would have major ramifications. However, these consequences pale in comparison to a stock market crash or the bankruptcy of one of the world’s biggest banks. All three events are equally likely to happen, but not necessarily in that order.”