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- Jamie Dimon has been a vocal critic of bitcoin since its earliest days, but his most recent comments have ignited a conversation about digital currencies on Wall Street. Two of the bankers’ main arguments against the cryptocurrency are that it is in a bubble, and it will ultimately be “crushed” by governments. We spoke with experts in the cryptocurrency space to examine those two critiques. They said bitcoin’s underpinning blockchain technology can’t be easily jeopardized by governments and future use-cases justify its current value.
JPMorgan CEO Jamie Dimon sparked a conversation about bitcoin among top Wall Streeters.
Since he called the digital currency “a fraud” in September, a slew of top Wall Streeters from BlackRock’s Larry Fink to Morgan Stanley’s James Gorman, have weighed in on bitcoin, which is up more than 400% year-to-date.
Dimon said during JPMorgan’s earnings call Thursday he would stop talking about bitcoin. His vow of silence, however, ended prematurely. The very next day Dimon bashed bitcoin at a conference in Washington, D.C. He concluded his remarks by saying he was done talking about bitcoin.
Whether Dimon can keep his word remains to be seen, but what is certain is that his critiques of bitcoin and cryptocurrencies will continue to drive conversation in both crypto- and Wall Street-circles.
‘Worse than tulip bulbs’
- Reuters/Mike Blake
Wall Street is full of folks who think the over $160 billion cryptocurrency market is in a bubble. Dimon said it is “worse than the tulip bulbs,” alluding to the speculative bubble of newly arrived tulips in 17th century Europe.
In fact, the notion that some folks are just betting on the price of bitcoin and other cryptocurrencies is not even contested among bitcoin’s most fundamental followers.
Crypto-evangelists, however, would argue that such investors are in the minority, whereas the majority of cryptocurrency investors are betting on the underpinning technology of their coins and tokens, rather than just looking for a quick profit.
“There is certainly some speculation,” Ryan Taylor, a former McKinsey analyst and CEO of Dash, a top cryptocurrency. “But it’s being driven by the belief that future use-cases will come to fruition.”
Crypto-skeptics often rebuke the argument for future use-cases, which range from toll systems to peer-to-peer energy exchange networks, by saying they are too far off to warrant current valuations.
“The real world benefits are said to take years to materialize, even among evangelists,” wrote UBS, the Switzerland-based bank in a recent note. The bank says at the end of the day people are just looking to sell at a higher price.
Bitcoin enthusiasts respond by pointing to the utility of cryptocurrency’s network, which sees more than 200,000 transactions per day, as evidence of its inherent value. Here’s Stan Miroshnik, CEO and managing director, Element Group:
“The bitcoin economy is supported by all the goods and services you can buy with bitcoin, as well as the infrastructure investments made by thousands of people to support the distributed bitcoin network. All of this has fundamental value. I can pay in bitcoin faster, cheaper and more secure than with PayPal, this is a fundamental value.”
PayPal did not respond for comment at the time of publication.
According to PayPal’s website, a bank transfer made through their platform takes approximately one business day. A bitcoin transaction typically takes under 30 minutes, although that number frequently fluctuates.
‘Governments are going to crush it one day’
Dimon doubled down on his position that governments would be a main impediment to the future growth of bitcoin and the overall cryptocurrency market on Friday, saying sovereigns will ultimately crush it once it becomes too big of a threat to their authority. Here’s Dimon (emphasis added):
The other thing I’ve always [said] about bitcoin, governments – and this is not a technological statement – governments are going to crush it one day. Governments like to know where the money is, who has it and what you’re doing with it, in case you haven’t noticed. Right?
China’s recent interventions into both currency- and crypto-markets best illustrates Dimon’s point. The country’s regulators in September deemed initial coin offerings, a red-hot cryptocurrency-based fundraising method, illegal. And currently there is a wide-spread crackdown on bitcoin trading underway in the country. China notably has also implemented restrictions on cross-border payments between its yuan and foreign currencies to keep renminbi from exiting the country.
China is an extreme case, but numerous countries, from the US to South Korea, have ramped up efforts to impose restrictions on the wild west of cryptocurrencies. This isn’t worrying most cryptocurrency enthusiasts.
- Markets Insider
Samson Mow, the CSO of Blockstream, a bitcoin software company based in San Francisco, told Business Insider that governments may dislike crypto, but the degree to which they can impact the digital currency is limited.
“Cryptocurrencies by design cannot be “closed down” because first, they are decentralized, and second, they’re just information,” Mow said. “To even try to close them down, you’d have to shut down the internet, and even then it would only be a minor hindrance.”
The bitcoin markets seem to agree with Mow. Since China banned ICOs, for instance, bitcoin has rallied more than $1,000.
Josh Olszwicz, a bitcoin trader, told Business Insider the markets have ignored the news out of China because it is not something that impacts its underlying blockchain technology.
“If it doesn’t affect the protocol, then it’s not a real problem,” he told Business Insider.”The bitcoin cash shakeup was much more worrisome from my perspective, but even then the core bitcoin protocol remained unaffected.”
If a country were to completely ban bitcoin, the network would still be there for people to use. And it wouldn’t be too difficult for people to get away with using bitcoin or other cryptocurrencies, because the network is anonymous and transactions and trades are hard to trace.