STAFF NEWS & ANALYSIS
“If you were a drug dealer, a murderer. . .” open an account at JP Morgan
By Simon Black - September 16, 2017

Via Sovereignman.com

On Tuesday afternoon, Jamie Dimon, the CEO of banking giant JP Morgan, let loose on Bitcoin.

He was speaking at the Barclays Financial Services conference, and when asked whether his bank employs any Bitcoin traders, he responded-

“If we had a trader who traded Bitcoin, I’d fire them in a second,” calling any trader who deals in the cryptocurrency “stupid”.

He went on to say that Bitcoin is a “fraud” and “won’t end well”.

Now, Dimon is a brilliant executive and banker. He knows his stuff. But… fraud? Really?

My dictionary defines fraud as “wrongful or criminal deception intended to result in financial or personal gain.”

That term seems to more aptly describe the banking industry that Dimon represents.

From Wells Fargo’s illegal opening of fake customer accounts to the constant manipulation of interest rates, exchange rates, and asset prices, outright FRAUD is standard practice among big banks.

Dimon also stated that Bitcoin is primarily appealing for criminals– “if you were a drug dealer, a murderer, stuff like that. . .”

Again, this is a totally baseless and confounding statement. 10+ million Bitcoin users are drawn to the cryptocurrency for a multitude of reasons.

For some, the fact that it is decentralized is a major factor. For others, it’s the low transaction cost.

Sending an international wire transfer through the banking system, for example, can take three days and cost $100. With Bitcoin it takes an hour and costs less than a dollar.

Sure, criminals might use Bitcoin. They also use Amazon.com gift cards and government bonds.

Ironically for Jamie Dimon, criminals even use JP Morgan bank accounts to launder their money, considering that the bank has paid BILLIONS in fines over the last few years for failing to detect their customers’ illegal activities.

To be fair, Dimon does raise a valid point about Bitcoin’s (and most major cryptocurrencies’) unbelievable price runups.

Bitcoin is up nearly 4x since the beginning of this year, and nearly 30x over the past four years.

That’s not supposed to happen. And it’s always precarious to buy or speculate in anything that’s at its all-time high.

Speculation is, after all, what’s driving most of this boom.

The original Bitcoin ‘White Paper’ from 2008 described the concept as a “peer-to-peer version of electronic cash” to “allow online payments to be sent directly from one party to another without going through a financial institution.”

In other words, Bitcoin was intended to be a medium of exchange for the digital world. Send money. Receive money. Buy things online. E-commerce.

That was a hell of an idea that makes a lot of sense.

But that’s not what Bitcoin is primarily being used for today.

Instead, Bitcoin is a source of speculation– people are buying something they don’t understand based purely on an expectation that the price will increase, at a time when the price is already near a record high.

Clearly such irrational behavior will create wild, violent, emotional price swings.

And that’s exactly what’s been going on over the last year. In fact Bitcoin’s price has fallen more than $1,000 (nearly 25%) just in the last few days.

Again, that’s not supposed to happen… not in an orderly market.

But this is not an orderly market.

There are too many mad speculators who think they’re geniuses for owning Bitcoin despite not knowing a hash from a block… yet they hold a extremists’ fanaticism that their prized asset will go up forever.

That’s ludicrous. Nothing goes up (or down) in a straight line. There will always be booms and busts. And the bigger the boom, the bigger the bust.

The key problem with the Bitcoin price is that it’s so difficult to determine what’s fair value.

Most other assets– stocks, bonds, real estate, etc. can be valued by some objective means.

If I want to buy a 5,000 square foot property that cost $650,000 to build, I at least have some basis of comparison to determine how much I’d be willing to pay.

Similarly, whenever I buy a private company, my analysts and I pour over the financial statements to determine its net asset value and see how much free cashflow the business generates.

Based on this analysis, we can come up with a bid.

Even currencies have certain indicators to determine whether they’re undervalued or overvalued.

The Economist, for example, routinely publishes its Big Mac Index to compare the price of a McDonald’s Big Mac around the world, and hence provide an objective valuation for currencies.

This is just one trivial example; the point is that there are countless ways to analyze various assets.

Bitcoin lacks most of those fundamentals. There’s no Big Mac Index for Bitcoin, no balance sheet or free cash flow.

One fundamental that stands out is “market cap,” i.e. the value of all Bitcoin currently in circulation.

Right now it’s about $60 billion, with a user base of more than 10 million [though a ton of those people are speculators and not real ‘users’].

By comparison the Danish krone currently has a market cap (i.e. M2 money supply) of $205 billion, yet a population of only 6 million people.

Gold has a market cap of roughly $7 trillion, over 100x the size of Bitcoin. And while gold also has no balance sheet or cash flow, it is owned by governments and central banks all over the world.

Whether Dimon likes it or not, Bitcoin is the future.

Our modern monetary system is based on an anachronistic 19th century idea of awarding unelected central bankers totalitarian authority over the money supply.

And our ‘modern’ banking system is a 13th century idea backed by mid-20th century technology.

It’s pretty pathetic, really.

Bitcoin, despite its flaws and mob of speculators, represents the first true advance in financial technology for the Digital Age.

This technology has endless possibilities to disrupt entrenched industries that have been screwing their customers for decades.

That fact alone makes it worth learning about.

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  • lulu

    Well go figure that bankers would bad mouth competition. They have had unfair advantage for so long that they have no sense of honesty, competence, fairness or dignity much less humility.

  • georgesilver

    JP Morgan was one of the biggest buyers of Bitcoin recently so he was right. It’s bought by criminals.

  • The man is afraid, as an authority figure his word influences the market, a loose lips sink ships kinda guy. He just fired a salvo at Bitcoin, out of a rational understanding? I doubt it, more like fear of an empire lost on his watch.

  • autonomous

    Whatever is subject to fraud bears caution. A big investor who disses the product he has invested heavily into should rightly be suspect. Also suspect should be those who sing its praises loudly and constantly. Since both groups of suspects are conspicuous, why would any sane person invest in crypto-currencies?

  • robt

    It would be nice to find an address for Gdax, the 2nd biggest trader of Bitcoin, whose recent 30 day volume is 1.9 billion dollars, and is currently trading $75 million a day.
    https://bitcoincharts.com/markets/currency/USD.html
    According to their FAQ they are FDIC insured up to $250,000 per account and the exchange is regulated. Actually, your funds are segregated to a US bank and thereby your funds are insured through your bank, which would mean insured if the bank went insolvent and assuming your funds had been segregated to the bank in time if there was a solvency problem with Gdax or Coinbase. BTC held by Gdax/Coinbase they say are insured by Lloyd’s of London.
    They offer a ‘recruitment bonus’ for referring new users, sort of an MLM type of thing. Actually the greeting on the home page tells me a friend invited me to buy $100 or more of Bitcoin and I and the friend would each get $10 of free BTC.
    Their address is a box number for (parent?) CoinBase, at Coinbase Customer Support, 548 Market Street, #23008, San Francisco, CA 94104. Looking at streetview for Oct 2016 and Feb 2017, the address, which was for Earth Class Mail, a virtual mail cloud service (‘choose any address you want’), has brown paper on the windows and what seems to be a homeless guy sitting out front; it seems to be vacant. In August 2016 548 Market St seems open for business with an Earth Class Mail sign out front. I guess ECM had moved; they then had a box number address nearby (with no street address, just a zip code, but they also still showed 548 Market St on their website, the apparently closed address) Recently they have said that they’re back at 548 Market St but just using it as a mail drop, so a box number for ECM which holds a box number for Coinbase which is Gdax. Gdax don’t accept calls or even give a phone number because according to the FAQ they ‘love to communicate with users’ on Twitter and Facebook for customer service. There is an automated support ‘bot’ icon on the website.
    I don’t feel that comfortable with a rather opaque identity of a corporation that trades a billion dollars a month that could vanish with the flip of a switch and which provides no physical address. This is not to imply bad faith on the part of Coinbase or Gdax or any other crypto, it would just be nice to be able to knock on the door of an office that you’ve been given the address for and where you could meet people face-to-face. Like going to a bank.
    If someone could offer additional information, it would be helpful for my, and probably others’, better understanding.
    It’s also worth noting that many or most of these exchanges are in remote places, if they even have physical addresses. The image of that guy who flew from Britain to Japan to sit outside Mt Gox’s office for days on end with a sign, hoping to get his money back (he didn’t, of course) was pathetic, and the number of other exchanges pulling the plug over the past few years should give one pause before depositing their money with strangers and hoping to get more back.
    As far as using BTC for transactions, any business accepting them usually instantly converts them to fiat currency, thus limiting their exposure to wild fluctuations in value, and also further revealing that BTC and other cryptos are just derivatives of currency. And to use BTC pricing exclusive of conversion to fiat is just impractical in these times. Relative stability is by definition the merit of a currency, and BTC and others are inherently unstable, thus their only use is as a speculative vehicle.

  • James Clander

    Whether Dimon likes it or not, Bitcoin is the future.

    Ha ha – says who?
    I wouldn’t trust the above statement even a little bit. (pun intended)

  • Casey Phyle

    Dimon is probably high enough in the money printer hierarchy to know about their plan to eliminate crypto, or at least make it very difficult to change it to fiat. That could come at any time, or as he said, it could go to 100T first. Got the feeling that what he said is a warning. It’s unthinkable that the paper money mobsters would let crypto exist unhampered, when they put so much effort into muscling down other competitors like gold and silver.

    • Exactly, Dimon wasn’t warning the Crypto Community, he was making a threat!

  • kenvandoren

    “Whether Dimon likes it or not, Bitcoin is the future.”

    The author makes that statement after giving a very credible list of why bitcoin is a bad idea. His conclusion comes from out of nowhere, and when I read that, thought I might have missed something, as it does not fit well with the rest of what he wrote. Intellectually, it was like running into a brick wall at at least 25 mph. Ultimately, I believe bitcoin suffers from the same major defect as the USD-$. It is not backed by anything. To my mind, fiat currency is fiat currency.

    Other than that, I see that erstwhile criminal fraudster Lloyd Blankfein is no longer G&S CEO. Hopefully (but sadly, doubtfully) he is in prison for his numerous past frauds. Most likely, he is still benefitting from his long association with the organized crime industry (banking as it exists today) that he has long been a part of.

    So which system-Bitcoin or the fiat USD and the banking industry-will suffer its next bust first?

  • #1 I like “Simon Black” though sometimes my eyes glaze over his newsletters
    #2 Blockchain technology is the future now, as for Bitcoin, I’d venture to agree, but I don’t know with any certainty. The best argument I can come up with is, it’s the most known and it was the first. Does it make it the best? Obviously, not in terms of speed or transaction costs, or even usability
    #3 Dimon was issuing a threat, not a mere warning. He knows much more than he is letting on. Are the “powers that be” threatened by Cryptocurrency? I bet they feel above it all and believe their own hubris. They don’t take it so seriously, and feel they can somehow squash it should the need arise, so in the interim, let the kids play a bit longer in the sandbox before putting them in timeout.

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