Gold bug Peter Schiff has used the recent crash in the May 2020 futures contract of West Texas Intermediate (WTI) Crude, which went below zero for the first time ever, to hit bitcoin claiming it doesn’t support the cryptocurrency’s narrative.

On social media, Schiff claimed that oil’s plunge into negative territory doesn’t validate BTC as an asset class. The economist and CEO of Euro Pacific Capital said bitcoin’s downside being limited to 100% – it’s inability to drop into negative territory even if it loses all its value – isn’t a reason to buy.

The price of the WTI Crude futures dropped below zero over several factors, which initially included a price war between Saudi Arabia, the de-facto leader of the Organization of the Petroleum Exporting Countries (OPEC), and Russia. The major factor behind the price action was, however, a near halt in demand amid the coronavirus lockdown.

As lockdowns prompted by the COVID-19 pandemic limit travel and airlines are forced to drop most of their activity, demand for oil plunged while production mostly kept on going. As a result, the capacity to store excess oil ran out.

The WTI futures contracts, as such, dropped below zero because of their own nature: buyers who hold the contracts when they expire are obliged to take possession of the physical commodity, but had no place to store it. The result saw sellers pay others to take the oil instead.

The United States Oil Fund (USO) ETF, an exchange-traded fund that attempts to track the price of West Texas Intermediate Light Sweet Crude Oil, plummeted as a result. The USO was trading at $13 in early January, and is now at $2.81 as a result. Since its inception, the fund hit a $116 all-time high in 2008, but has been on a downtrend since.

USO price chartSource: Google

Schiff warned that BTC supporters pointing to the huge losses in the ETF as an example of the risks associated with traditional investments “ignore the potential for huge losses” in Grayscale’s Bitcoin Trust (GBTC) and the “significant threat that poses to the crypto market.”

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