Peter Schiff, a vocal critic of Bitcoin (BTC), recently questioned the idea of the cryptocurrency serving as part of the U.S. strategic reserve, calling the idea a "ridiculous" plan. In his view, such a move would be ineffective and problematic, primarily due to Bitcoin's unstable volatility and potential impact on market stability.

This was in response to Tom Lee of Fundstrat, who said that BTC could help solve the U.S. budget deficit. In a recent CNBC live, Lee suggested that if the cryptocurrency is added to the list of reserve assets, it could help offset some of the nation's massive $36 trillion debt because of its potential to appreciate in value. 

He also pointed out that traditional ways of reducing the deficit, such as changing tax policy or cutting spending, may not be enough on their own in the current economy. Therefore, Bitcoin could be a useful asset for the U.S. Treasury and help manage the debt, the expert argued.

Why not? Peter Schiff explains

Not surprisingly, Schiff did not think this was a good idea. He highlighted the liquidity risks, noting that if the U.S. held a significant amount of Bitcoin, any attempt to sell could easily trigger a market crash, rendering the reserve immediately ineffective. 

Such a scenario, according to Schiff, would defeat the purpose of a strategic asset intended to stabilize or enhance fiscal resilience. He argued that Bitcoin's volatility and illiquidity make it unsuitable as a serious reserve asset and cautioned against what he sees as misplaced optimism about its use by governments.

Financial analyst, trader and crypto enthusiast.

Gamza graduated with a degree in finance and credit with a specialization in securities and financial derivatives. He then also completed a master's program in banking and asset management.

He wants to have a hand in covering economic and fintech topics, as well as educate more people about cryptocurrencies and blockchain.