The “Summer of Cryptocurrency” continued this week as JPMorgan CEO Jamie Dimon railed against bitcoin while speaking Tuesday at a Barclays financial conference in New York. He called it a “fraud” that is “worse than tulip bulbs,” in reference to Tulipmania from the Dutch Golden Age.
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He said the "currency isn't going to work" because "you can't have a business where people can invent a currency out of thin air and think that people who are buying it are really smart." People including one of his daughters, apparently, as she bought bitcoin and now "she thinks she is a genius" after it went up according to Dimon.
But the ivory-maned titan was just getting warmed up: He went on to say bitcoin makes sense if you live in Venezuela or North Korea or if you're a drug dealer or a murderer. He also said if a JPMorgan trader began trading in bitcoin, he'd fire them in a second for two reasons: "One, it's against our rules. Two, it's stupid."
The negative headlines are taking a toll: Bitcoin reportedly fell by as much as 4% on Tuesday, bringing its decline from an early September high of $4,950 to nearly 16%.
Update: As of 9:48 a.m. Pacific Time on Sept. 13, bitcoin prices have dropped another 5.3% to trade at $3,930.57.
Some of this is sour grapes, to be sure. Dimon has been calling bitcoin dumb for years, saying it was a terrible store of value back in 2014. Yet the currency is trading near $4,200 from less than $250 in the second half of 2015. And VC activity in bitcoin and blockchain-related companies has been red hot, with investment in the sector this year poised to beat 2016's $600 million total, per the PitchBook Platform.
Others, such as Yale professor Robert Shiller of "Irrational Exuberance" fame, have been calling bitcoin a bubble (although Shiller has been apprehensive for years). The latest Bank of America Merrill Lynch fund manager survey shows Wall Street pros are calling bitcoin the single "most crowded trade."
Elsewhere, Chinese authorities are cracking down on the rise of initial coin offerings (ICOs), raising fears of broader regulatory headwinds. And yes, North Korea is even embracing cryptocurrencies as a way to bilk economic sanctions, playing into the impression that bitcoin and its ilk are tools of rogue nations, the dark web and criminal elements.
To that end, there are plenty of examples. Some $5.3 million was stolen from Yapizon, a South Korean exchange, in April. Millions more were lifted from Bithumb, another South Korean exchange. Hackers are using cell phones to deal coin. The Mt Gox theft remains raw. Exchanges in Russia and China are being shuttered amid accusations of enabling crime and precipitating fraud. The list goes on.
This is a consequence of bitcoin's distributed, deregulated nature. There is no 1-800 number to call to report fraud. No payment reversals. No legal recourse against anonymous counterparties often in foreign countries.
Dimon believes this will be the downfall: "Someone's going to get killed and then the government's going to come down on it," he said, while admitting the blockchain technology underlying cryptocurrencies like bitcoin shows promise. JPMorgan is developing a blockchain ledger based on Ethereum called "Quorum."
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Article by Anthony Mirhaydari, PitchBook