
JPMorgan CEO Jamie Dimon says Bitcoin is a fraud that will eventually blow up - mudil
https://www.cnbc.com/2017/09/12/jpmorgan-ceo-jamie-dimon-raises-flag-on-trading-revenue-sees-20-percent-fall-for-the-third-quarter.html
======
cjlars
Bitcoin (and other cryptos) do have real uses for which there is real demand.
My worry is that the current price has substantially outpaced the support that
those uses offer.

Let's go over some of the things that make up bitcoin's price:

-You can make legal retail transactions -- a very small portion of transfers, but legitimate. This is a 'regular money' use.

-Make large 'wire' transfers for less than it would cost through your bank. Totally legitimate and valuable in my opinion. This is a 'Regular money' use.

-There are future expectations of bitcoin expanding the above two points. Supports the 'regular money' points above.

-You can use bitcoin to (illegally) move money out of countries like China, which is now being cracked down on. This is a black market money / money laundering use.

-Use as a speculation instrument. Valuable in a way, but only bullish on net because it is supported by the above services. This can be done with 'regular money', but speculative financial instruments are primarily assets and not regular money.

There are many others, but those are the big ones I know about. The issue is
that it appears the price is 80%+ speculation, 15% capital flight, and maybe
only 5% of the demand for the asset is based on the traditional 'regular
money' uses... What this means is that once the speculative support moves from
net positive, to net negative (meaning, once Bitcoin gets a widespread
reputation as being a dog) things start to go downhill hard.

Of course my estimates above are very loose, and in the future the expansion
of bitcoin into a far larger mainstream uses case could overpower all of them,
but either my estimates above need to be off (and they may be) or we need to
see large scale adoption of bitcoin for legitimate uses at some point (also a
maybe).

~~~
prostoalex
> Make large 'wire' transfers for less than it would cost through your bank.

Assuming both the sender and the recipient want to use BTC as a store of
value. Otherwise there's a commission involved from BTC-to-fiat conversion at
both ends of the transaction.

Also, banks tend to have a flat fee on wire transfers. Assuming a $25 fee on
both the sender and the recipient, sending $51 will likely be more efficient
in BTC. But at some point ($5,100? $51,000? $5,100,000?) the wire transfer
becomes the preferred choice.

~~~
omarchowdhury
Also to be noted is that BTC to fiat adds a significant counterparty risk that
isn't really an issue in fiat to fiat transfers (when was the last time a bank
ran away with your wire transfer?), and also one of Satoshi's cited reasons
for creating Bitcoin in the first place. BTC to fiat adds a redundancy that
only makes sense to add to the equation if you're doing something illegal.
Otherwise, why not accept a fiat wire transfer in the first place?

~~~
Doxin
The important thing here is that illegal isn't the same thing as doing
something bad. There's enough regimes out there where you'd want to hide
certain spending patterns.

------
weirdstuff
"Currencies have legal support. It will blow up."

Diamond reminds me of a bartender warning his patrons not to smoke pot.
(Because alcohol is mostly legal, while pot is mostly illegal.)

Also, fiat currencies need to maintain public confidence, part of which comes
from a legal code. The remainder comes from management of the currency and its
underlying domestic economy. I suspect a great deal of the value of Bitcoin
may come from an _eroding confidence of the U.S. dollar_ ; especially after
the events of '08 and the ongoing weak economy.

~~~
cm2187
No I think it means you can force someone to take the currency for payment. If
I don't want to take bitcoins for payment, no one is going to force me.

~~~
weirdstuff
Is it illegal for a seller to price something in the U.S. in bitcoin (or a
some other form of exchange) and not dollars?

If cigarettes became a more attractive medium of exchange, is it illegal to
use that medium between two private, consenting parties?

~~~
cm2187
I believe that's the very definition of legal tender:

[https://en.wikipedia.org/wiki/Legal_tender](https://en.wikipedia.org/wiki/Legal_tender)

It doesn't prevent you from accepting other means of exchange (though in some
countries it does), but it does force you to accept it, even if you don't like
it.

~~~
namelost
Not quite, legal tender means if someone _owes_ you money, you have to accept
it.

~~~
nobodyorother
Not if you're the US government, apparently?

Tim DeChristopher spent 21 months in prison despite how he "had raised
sufficient funds for an initial payment to the BLM (which the BLM refused to
accept)."

[https://en.wikipedia.org/wiki/Tim_DeChristopher#Trial](https://en.wikipedia.org/wiki/Tim_DeChristopher#Trial)

(I bring this up because I'd always wondered about how why that case fell out
that way, and apparently it can't, per the common meaning of the terms, so my
understanding of legal tender seems correct?)

------
evgen
Well, if anyone will know how to operate a long-running fraud it would be that
guy.

(Sorry, but someone had to say it...)

~~~
koolba
Are you saying that simply because he's the head of a large financial
institution or is there some specific accusation against Dimon?

If it were a binary decision, I wouldn't put him in the bad guy camp. At least
based on what I know about the guy.

~~~
transverse
Don't you know how the financial system works? Banks make currency. With
Bitcoin, they haven't figured out how to do the same. Their empire is in
danger. His argument is predicated on the false assertion that currency has to
be legally recognized; it doesn't. It only has to be accepted by those who
trade with it. Not only is he bashing Bitcoin, but he is bashing all of
cryptocurrency. What an idiot he is. The real fraud is perpetrated upon us by
banks who lend dollars without holding hold an equal value of gold or silver.
In past centuries, this was punishable as a felony by death.

~~~
brockwhittaker
Banks like JP Morgan don't have the power to put more money into circulation,
so you're wrong.

~~~
lotsoflumens
You should review the concept of "fractional reserve banking".

------
vinchuco
>Bitcoin fell to trade around its session lows after Dimon's comments. As of
2:05 p.m. in New York, bitcoin traded at $4,154.04, down 0.8 percent.

What percentage of bitcoin users actually use it often for its practical
value, as opposed to hoarding and speculating? How to estimate this?

~~~
drcode
I miss the olden times when there used to be something called "saving"...
nowadays everyone is just "hoarding".

~~~
eropple
People don't call the saving of stable, non-speculative currencies "hoarding".

~~~
graedus
Yes they do. Here's a Bloomberg headline I just ran across today: "Rich
Retirees Are Hoarding Cash Out of Fear" [0]

The word hoarding is often used to cast ordinary and prudent saving of stable,
non-speculative currencies like US Dollars and Euros in a negative light.
Economists and central bankers often want the inflation rate to be higher - to
reduce debt loads, among other reasons - so they want people (other people, of
course) to stop saving so much and start spending more.

[0] [https://www.bloomberg.com/news/articles/2017-05-16/rich-
reti...](https://www.bloomberg.com/news/articles/2017-05-16/rich-retirees-are-
hoarding-cash-out-of-fear)

edit: grammar

~~~
zzalpha
Well, there's an efficiency argument related to holding onto cash instead of
investing. That is, holding onto large quantities of cash and not investing
means losing out on returns. The only time that's rational is if there's
significant market risk, or if you get better returns due to appreciation in
currency value (which amounts to treating money like a commodity/investment).

So, I'd argue that holding onto large quantities of money in lieu of allowing
it to circulate due to fears does qualify as "hoarding", insofar as the money
could be put to better, more productive use while the person holding onto the
cash may be losing out on potential upside.

The term is particularly apt when there are concerns of a deflationary spiral,
as cash hoarding truly does become a problem in that circumstance.

------
yyyyip
Thankfully, the blockchain's 8 million trillion hashes per second and robust
elliptic curve cryptography don't care what Jamie Dimon thinks.

~~~
nwah1
And my mountain of Beanie Babies don't care what anyone thinks either. The
value can only go up.

~~~
mrb
Unlike Bitcoin, Beanie Babies solve zero technological problems.

------
kyleblarson
So the guy that relies on exporting inflation so that his own government can
print money at will and bail him out as needed is calling an alternative
currency a fraud?

~~~
uoaei
Yes. He has a vested interest in saying what he is saying. Let's defer our
judgment until less encumbered members of the economics community have
something substantial to say.

------
eponeponepon
I think this is definitely well into "well, he would say that, wouldn't he?"
territory. But I also think it's interesting that Morgan are also, as the
article mentions, making forays into blockchains - he is specifically talking
about _Bitcoin_ , and not cryptocurrencies at large. I expect this is exactly
the sort of thing someone preparing to launch their own version - that they
have control over - would say in an attempt to chip away at Bitcoin's
respectability.

~~~
subway
JP Morgan's work on blockchains seems pretty far divorced from crypto-
currencies.

Much of the work I've seen has been more ledger/private chain oriented.

------
Icedcool
There is a theory called Gresham's Law, that states that bad money drives out
good, because people hoard the good money.

This is one of the problems with bitcoin right now. As a currency its
variability AND value is high, which leads to people not wanting to spend it.

This ironically leads to a problem with the currency not being used.

There are other problems, but for its wide spread acceptance and use to buy
pizza, I sure don't want to spend something that is worth 1$ today, but might
be worth 100$ tomorrow.

~~~
vinchuco
>The Nobel prize-winner Robert Mundell believes that Gresham's Law could be
more accurately rendered, taking care of the reverse, if it were expressed as,
"Bad money drives out good if they exchange for the same price." [1]

Not attacking your main point, but questioning the correct application of this
principle. It seems like it originally was meant to talk about the same
resource (a coin made of metal, metal becoming higher price than the coin). It
doesn't seem like Bitcoins are intrinsically made of dollars.

[1]
[https://en.wikipedia.org/wiki/Gresham%27s_law](https://en.wikipedia.org/wiki/Gresham%27s_law)

------
wyc
Other thread got duped...reposting here:

It seems that his staff feel ambivalent about his comments:

JPM Blockchain Lead: "¯\\_(ツ)_/¯"

[https://twitter.com/AmberBaldet/status/907675559492288512](https://twitter.com/AmberBaldet/status/907675559492288512)

Former JPM Director of Global Macro: "Jamie, you're a great boss and the GOAT
bank CEO. You're not a trader or tech entrepreneur. Please, STFU about trading
$BTC."

[https://twitter.com/agurevich23/status/907692985424371712](https://twitter.com/agurevich23/status/907692985424371712)

Got these sources from Fortune's Term Sheet:

[http://fortune.com/tag/term-sheet/](http://fortune.com/tag/term-sheet/)

------
mrb
Marc Andreessen's words would apply here: « _old white men crapping on new
technology they don 't understand._» :-) [https://www.cnet.com/news/marc-
andreessen-on-warren-buffett-...](https://www.cnet.com/news/marc-andreessen-
on-warren-buffett-old-white-guy-who-doesnt-get-tech/)

------
Finnucane
Dimon does, after all, have experience with frauds that blow up.

------
dbcooper
JP Morgan has it's own (Etherium derived) blockchain system for transactions
and smart contracts, Quorum.

[https://www.jpmorgan.com/global/Quorum](https://www.jpmorgan.com/global/Quorum)

------
fiftyacorn
the contrarian investor in me makes me want to jump onboard the bandwagon now
if a bank CEO thinks its dodgy

~~~
xutopia
It's called buying low and selling high :D You can buy a few hundred dollars
worth of BTC and see what happens if that's not a huge risk for you.

------
carlchenet
Fraud like the current banking system?

------
kodri
Says Mr subprime. Add china fud about bitcoin ban and the message is : the sec
is going to allow bitcoin trading and we need to buy cheap

------
fortythirteen
The ever persistent question I have about bitcoin is simple:

Who's actually buying it with cash at a $4k+ valuation? Is anybody in their
right mind doing that or is it a completely theoretical number?

The thing about Bitcoin is that it's 100% transparent, except for where it's
not.

~~~
dwaltrip
[https://coinmarketcap.com/currencies/bitcoin/#markets](https://coinmarketcap.com/currencies/bitcoin/#markets)

Look at the 24 hour volume column to answer your question (yes, it is a robust
market with many buyers and sellers). There are a few foreign exchanges with
zero fees, so those volumes must be heavily discounted, but the majority of
the listed volume is legitimate.

------
NicoJuicy
Yeah, just when the price is lower. A lot of these so called experts have a
personal gain on this :)

------
Zigurd
This probably a knowing lie. At the very least it is hypocritical. JPM trades
gold, which is no more or less of a "fraud" than cryptocurrency. If you
compare the total market in gold with that of bitcoin, you can't even say
bitcoin, or cyptocurrencies as a class, are in a valuation bubble.

------
inDigiNeous
Solid arguments from this guy. "It's stupid." Go suck a d*ck JPMorgan CEO.
Thanks for being part of creating poverty all around the world. Of course
these guys feel offended, they see potential in this and are afraid they can't
control it.

------
KasianFranks
Similar rhetoric has been spewed in the past by brick and morters related to
technology. The masters of the Universe no longer exist. We're witnessing the
final flailing of old institutions.

~~~
mythrwy
That's what you think.

Capital and it's masters can change institutions like a hermit crab does
shells.

