Bitcoin is ‘stupid’ and ‘will blow up’.
Or so says top brass at JPMorgan, Jamie Dimon. He adds: ‘If we had a trader who traded bitcoin, I’d fire him in a second for two reasons. One, it’s against our rules. Two, it’s stupid.’
Likening bitcoin’s rapid rise to the Dutch tulip mania of the 17th century, Dimon frames the crypto’s rise as ‘fraud’. He was quoted yesterday as saying, ‘It won’t end well. Someone is going to get killed.’
That’s a tad dramatic. But, unsurprisingly, the price of bitcoin tumbled after his statements.
Have a look at bitcoin’s decline in the past day…
[Click to enlarge]
The cryptocurrency fell 6.3% on the back of the comments. Trading to a low of US$3,790.21 (AU$4,747), before bouncing back overnight to its current price of US$3,888.75 (AU$4,790).
The lesser known and slightly less volatile Ethereum also fell 4.8%, to US$276.22 (AU$345).
Yet Dimon isn’t the only banker to trash bitcoin.
Back in July this year, Jens Weidmann, the head of Germany’s Bundesbank said that cryptocurrencies like bitcoin could make a financial crisis even worse, noting:
‘Allowing the public to hold claims on the central bank might make their liquid assets safer, because a central bank cannot become insolvent.’
In the past decade, both the European Central Bank and the Federal Reserve Bank have provided trillions of capital in stimulus measures to keep their economies humming along.
Of course, a central bank can’t become insolvent. Instead, they just print money to maintain the status quo. In doing this, they devalue the cash in your wallet. What your dollars bought you yesterday buy you less today.
So, it’s not surprising to discover that bankers don’t like alternatives to fiat currency. If you take your money out of the financial system, they can’t control it.
FinTech businesses, on the other hand, are more than happy to embrace cryptocurrencies. Yoni Assia, cofounder of investment service eToro, pointed out that no one should be surprised by Dimon’s comments:
‘Big institutions such as JPMorgan will need a plan if they are to avoid being a casualty of the financial revolution. We shouldn’t be surprised that this threat sparks extreme reactions from the industry’s top insiders.’
Bankers feel threatened by disruptive currencies like bitcoin.
And so they should be. Cryptocurrencies will do to the financial system what the internet did to the media.
The internet forced the media to change how they tell a story. No longer could the dark parts of the world be hidden behind a publisher’s agenda. People had the chance to seek out alternative information.
Genuine, independently-run cryptocurrencies will do the same to the financial system. People will be able to choose another form of money that is beyond the government’s control.
Cryptocurrency is a monetary rebellion
There’s been an awful lot of noise this week about China and bitcoin. Two weeks ago, Chinese authorities decided to ban initial coin offerings, or ICOs.
Then came the unconfirmed reports that the Middle Kingdom was looking to shut down cryptocurrency exchanges.
There’s a problem with these reports, though. This year, everyone reckons they’re a bitcoin expert. Yet, unless you’ve been analysing this industry for the better part of six years, chances are that few people in the mainstream will know what they’re talking about.
Which is why I often ask our Secret Crypto Network editor Sam Volkering for his views on anything cryptocurrency related.
Yesterday, he told me that anyone in the game ‘long enough’ would know that China’s recent moves are nothing to worry about:
‘China has put a halt on crypto before, back in 2013.
‘It sent markets into a spin then as well. And after they banned financial institutions from dealing in bitcoin back then, the price went as low as US$100.
‘Well, we know what happened from there.
‘China might have put a halt on ICOs and are treading cautiously with crypto. But it’s not a flat out ban. They’re not that stupid.
‘They’re just trying to figure out how to deal with it all and make it work for them.
‘But what this kind of fear does, is shock investors. It scares people to exit their crypto positions. It makes them lose sight of the bigger, long term picture.’
Sam’s suggestion when it comes to cryptocurrencies is simple: Keep calm. The volatility in cryptos won’t last forever. But governments just need to work out how to tolerate its presence.
It will be difficult for them to regulate, but they can’t stop it now. The money rebellion has begun. Click here to learn how you can become part of it.
Editor, Markets & Money