JP Morgan CEO Jamie Dimon commented that he thinks Bitcoin is a fraud, and that “it will eventually be closed.”
CNBC continues its amazing economic news coverage with his interview.
Yes, the CEO of a major financial institution thinks Bitcoin will be “closed.”
Look, however unlikely, it is possible that the Bitcoin price goes to $0. It is not, however, anywhere within the realm of possibilities that the crypto-currency will be “closed” as Dimon put it.
This is because there is nothing to close. It is not a business. It is not owned by anyone except a vast and disunited network of Bitcoin miners and those who own Bitcoins.
So again, miners could conceivably shut off their computers. People who hold Bitcoin could conceivably sell off at such a rate that the price crumbles. But no one can “close” the cryptocurrency.
If you listen to his complete remarks, what he seems to mean is that governments will crack down on Bitcoin when it becomes too popular.
“Wait until someone gets hurt, or wait until it is used for illicit purposes–which it is somewhat used for illicit purposes–[governments] will close it down.”
Governments can shut businesses down, but they cannot shut Bitcoin down. It is too decentralized. They can make it illegal to buy, sell, or trade, Bitcoin, like China did. And yes, that had an impact on the price. But that is not the same as shutting it down.
That is shutting it down in the same sense that the U.S. government shut down liquor sales during prohibition. They didn’t. But they did increase corruption, give rise to organized crime, and allow some people to get rich off the black market for alcohol.
So why listen to this guy? Because he is the CEO of JP Morgan? So he has had some success in trading and manipulating fiat currency. Should we believe him that Bitcoin is a “novelty”?
History has some hilarious examples that show we should take these predictions with a grain of salt.
1903: “The horse is here to stay but the automobile is only a novelty – a fad.” — President of the Michigan Savings Bank advising Henry Ford’s lawyer, Horace Rackham, not to invest in the Ford Motor Company.
But even a broken clock is right twice a day. Dimon correctly sees the benefit of crypto-currencies for people living under oppressive governments. The Daily Bell has previously reported on a Bitcoin funded escape from Venezuela.
“If you were in Venezuela or Equador or North Korea you’re better off probably using Bitcoin than using their currency. That can’t possibly be true in the United States, unless you’re speculating. And that isn’t a reason to say something has value. Because other people are gonna speculate. That’s tulip.
What he’s referring to is the Tulip Mania. Prices for the bulbs of the newly introduced flower skyrocketed in the Netherlands in 1636. Everyone wanted to get in on the rising prices, and rampant speculation sent the price even higher. But then the price collapsed, because people weren’t buying tulips for the flowers, they were only buying tulips for the speculative potential.
There is some element of truth to this for Bitcoin today. In many cases, people are buying the crypto-currency not to invest long term, nor as a hedge, nor as an actual medium of exchange. It’s the promise of making a few quick bucks due to the price fluctuation.
The difference is that some people actually are using Bitcoin as a medium of exchange. As Dimon points out, some of this commerce is illicit. But that should only lend more credence to the fact the currency is useful. As long as governments will push certain things onto black markets, there will be an incentive to use an alternative to their currencies as well.
Some people thought that cars had little practical application, and that the internet was basically a useless toy. In the early stages, they were right, but they couldn’t see the future potential.
Dimon went on to say “[Bitcoin] is just not a real thing, and eventually, it will be the emperor with no clothes.”
But what then is the U.S. dollar? What is the entire banking industry which Dimon and JP Morgan represent?
This is what is so aggravating about people who are always trying to save us from ourselves. He says the government would shut Bitcoin down when someone gets hurt, like they are going to protect the consumer from shady financial transactions.
JP Morgan received a government bailout after participating in shady loans and being reckless with deposits. The U.S. dollar is the biggest scam in currency, propped up only by its acceptance and U.S. might.
Talk about an emperor with no clothes! The whole financial system could collapse if one kid yells, “He’s naked!”
And that is when Bitcoin would be quite the asset to hold.