He expressed this thought on Twitter, saying:
„Very few institutional investors are buying Bitcoin. Only those few that are buying are extremely explicit about their positions. They have to convince others to buy to raise the price so they can sell. The financial media also gives them a stage to talk about their books.“
In other words, Schiff accuses Bitcoin of being a Ponzi scheme, i.e. a scam, in which the investors who advertise it would be complicit in the scam itself.
However, this seemingly logical reasoning is the child of a rather widespread misunderstanding, namely that it is possible to influence the bitcoin market with propaganda in its favor.
Why Peter Schiff’s reasoning on Bitcoin is wrong
Such reasoning, on the other hand, is wrong for no less than three reasons.
First, the propaganda involving Bitcoin is not, and never has been, solely pro-bitcoin. On the contrary, the propaganda of the detractors is often more impressive than that of the supporters, but despite this the price of BTC in the long run continues to grow.
Bitcoin is not appreciated thanks to positive propaganda, but despite the negative propaganda.
Secondly, the activity of individual players who make positive propaganda is so limited that they are not able to influence the entire market in the slightest.
In the history of Bitcoin, one can count on the fingers of one hand the cases of individual players being able to reverse a spontaneous trend thanks to propaganda. The last time this happened was in mid-2019 thanks to Facebook, i.e. the most important and extensive social network in the world.
Put another way, individual institutional investors are not able to manipulate the market trend by speaking well of Bitcoin.
The third reason is that the price of bitcoin depends not only on demand, but also on supply. This, unlike almost any other asset, is in fact totally and inexorably inelastic to the market, so when demand goes up it is inevitable that the price will go up as well.
Since demand does not go up at all only thanks to propaganda, in theory there would not even be a need to promote it in order for its value to increase over time (although this is by no means a given).
For example, until 2013, propaganda in favor of Bitcoin was so limited that it could be considered irrelevant. From the moment it landed on the financial markets, around mid-2010, until the end of 2012 its value increased by 22,400% in just two and a half years, practically in the absence of positive propaganda.
Therefore it is absolutely incorrect to claim that the demand, and therefore the price, of bitcoin is driven solely by propaganda, regardless of whether institutional or retail investors are doing it.