Crypto Critic Peter Schiff Slams Bitcoin and Ethereum ETFs, Warns of Looming Liquidity Crisis

Bitcoin and Ethereum are experiencing a significant downturn as the Japanese yen carry trade unwinds and the US presidential election looms. Over the past 24 hours, Ethereum (ETH) has plummeted by more than 22%, with a 32% drop in the last week, while Bitcoin (BTC) has seen a decline of 16% and 26% in the same respective time frames.

The ongoing crypto sell-off can be attributed to various factors, with a key driver being the unwinding of the Japanese yen carry trade following a 0.25% interest rate hike by the country’s central bank. Japan, known for its prolonged low-interest rate environment, was the final central bank to move away from negative interest rates, a decision that holds significance as other central banks like the Bank of England, European Central Bank, and Swiss National Banks have cut rates, with the Fed hinting at a forthcoming cut in September.

Traders are now unwinding a long-standing carry trade practice where they borrow from low-interest-rate countries to invest in higher-rate countries. The borrowing from Japan and investment in the US has been a popular trade strategy over the years.

Additionally, the crypto market has been impacted by political developments, particularly polls indicating a rising probability of Kamala Harris defeating Donald Trump in the upcoming US presidential election. This uncertainty, coupled with geopolitical tensions in the Middle East, increasing concerns of a US economic downturn, and weak technical indicators, has contributed to the downward trend of Bitcoin, Ethereum, and other altcoins.

Renowned crypto critic and gold advocate, Peter Schiff, has voiced concerns about potential liquidity crises in Bitcoin and Ethereum Exchange Traded Funds (ETFs). Schiff warned that these ETFs could face challenges due to weekend losses and Monday’s market performance, potentially leading to overwhelming liquidations in the spot market if ETF investors decide to sell.

Despite Schiff’s negative stance on Bitcoin and Ethereum, historical data reveals that these assets have significantly outperformed gold, his preferred investment choice. Bitcoin has surged by 21% this year, outpacing gold’s 15% increase, and over the past five years, BTC has soared by 360%, far surpassing gold’s growth of less than 80%.