James Dimon, the Chief Executive Officer of JPMorgan Chase has criticized the value of Bitcoin noting that the cryptocurrency is not a “real thing.”
Bitcoin is a peer-to-peer electronic cash system. It was first created in 2008 by either an anonymous programmer or a group of programmers under a pseudonym, Satoshi Nakamoto. “Nakamoto” released Bitcoin in 2009 as an open source software. It is a decentralized electronic currency that is not controlled by any government. It is one of the most popular cryptocurrencies in the world. Litecoin, Peercoin, Namecoin and Ripple are among the other cryptocurrencies available.
Bitcoin is a community-run system. It has often been referred to as the first “start-up currency”. By the beginning of 2015, there were 100,000 merchants and vendors who accepted Bitcoins as payment. Bitcoins have been used in illegal trade online as well. Critics argue that digital cash systems are volatile and speculative in nature and comes with a number of inherent risks.
In August 2017, it was announced that Bitcoin was being split into two. When the cryptocurrency’s power brokers could not reach unify behind a single solution, Bitcoin Cash was created. This split has been referred to as a “fork.” Due to Bitcoin’s bullish performance in the market, the value of all Bitcoins in the world is now more than $56 billion.
James Dimon, the Chairman, President and Chief Executive Officer of JPMorgan Chase, is one of the most respected voices in the business world. He was speaking at a banking industry conference organized by Barclays.
When asked about Bitcoins he said, “It's just not a real thing, eventually it will be closed. I'm not saying 'go short bitcoin and sell $100,000 of bitcoin before it goes down. This is not advice of what to do. My daughter bought bitcoin, it went up and now she thinks she's a genius. It's worse than tulip bulbs. It won't end well. Someone is going to get killed. Currencies have legal support. It will blow up.”
Dimon compared the rise of Bitcoins to the “Tulip Mania” phenomenon that occurred in the 17th century. In Netherlands during the Dutch Golden Age, the contract prices for bulbs of the recently introduced tulip reached extraordinarily high levels. The prices then dramatically fell by February 1637 and the bubble burst.
The CEO of JPMorgan Chase said that if he found out that one of the traders in the company was trading in cryptocurrency, he would fire them. He said, “I would fire them in a second, for two reasons: It is against our rules and they are stupid, and both are dangerous. Don’t ask me to short it. It could be at $20,000 before this happens, but it will eventually blow up. Honestly, I am just shocked that anyone can’t see it for what it is.”
Following Dimon’s remarks, the value of Bitcoins fell in the market. The cryptocurrency traded at $4,106.25, down 2%. However, there are those in Wall Street who have come out in support of the cryptocurrency and they have begun embracing its ascent in value. Tom Lee, who is part of Fundstrat has said that he expects the value of Bitcoin to reach $6,000 by 2018.
Our assessment is that Dimon echoes the views held by traditional banker that the surge of Bitcoin in the market is nothing more than a bubble. They believe that without the support of the government, this form of currency will ultimately lose its value. However, if governments begin embracing cryptocurrencies, then it would become the currency of the future. Bitcoins are a serious threat to traditional banking.