Bloomberg reports that Chase Bank CEO Jamie Dimon called Bitcoin a “fraud” at an investor’s meeting today. Dimon said that Bitcoin is “worse than tulip bulbs” and that he would fire any employee trading Bitcoin on the company’s accounts.
Dimon’s comparison refers to the Dutch tulip mania of the 1630s. During this time, Dutch traders began speculating on the price of tulips, driving the price higher and higher. At the peak of the bubble, a single tulip bulb cost the same as a riverfront home in Amsterdam.
Tulip mania, however, was driven by speculation in an asset that isn’t particularly valuable. Other than looking pretty, tulips serve little purpose. Dimon’s comparison of Bitcoin to tulip bulbs either shows severe bias or a shocking ignorance of Bitcoin’s fundamentals. Whether Bitcoin attains mainstream adoption or not, its peer-to-peer payment network is clearly more valuable and important than a mere flower.
Many have argued that Bitcoin, and the entire cryptocurrency sector, are in the midst of a sizeable bubble. Given Bitcoin’s massive price increases over the past year, they may well be correct. Even if Bitcoin is in the midst of a bubble, however, it would be more useful to compare it to the dot-com bubble rather than tulip mania.
The dot-com bubble was driven by excessive exuberance over the transformative power of the Internet. Investors had the right general idea in betting on the Internet, but got carried away when it came to investing in companies with no revenue or business plan.
Despite temporary losses after the collapse of the dot-com bubble, investors who chose solid Internet-based companies have done extremely well. Those who purchased shares of such promising companies as Amazon, eBay and PayPal have netted investors sizeable returns--even if they had invested at the height of the bubble. That’s because these companies, and the technology that backstops them, have such incredible potential.
Dimon doesn’t really justify his critique of Bitcoin. Despite calling the currency a “fraud” and “scam” and suggesting that those who trade it are “stupid,” his remarks carry surprisingly little substance. Dimon’s only specific comment on Bitcoin was:
“Someone’s going to get killed and then the government’s going to come down.”
He snarkily added:
“If you were in Venezuela or Ecuador or North Korea or a bunch of parts like that, or if you were a drug dealer, a murderer, stuff like that, you are better off doing it in Bitcoin than U.S. dollars.”
Clear conflict of interest
Perhaps Dimon’s opinion of Bitcoin is tainted by his knowledge that it could one day put him out of work. Bitcoin and other digital currencies may have many fascinating and complex features, but at their heart, they are basically a way of transferring money directly from one individual to another, or from customer to merchant.
Bankers are the ultimate middlemen. Consider that banks:
Allow for the convenient storage of savings. Without banks, consumers had to store currency under their mattress or bury it in the yard.
Process and settle credit card transactions
Clear payments by check
Is it any surprise that Dimon is opposed to a technology that would allow direct peer-to-peer payments without giving banks an opportunity to take their cut?
Bias? What bias?
Dimon is certainly a renowned expert in the financial markets and is arguably one of the best banking CEOs in the world. It’s understandable that Bloomberg would report on his opinions, but is surprising that such a reputable and distinguished publication failed to remark on Dimon’s obvious bias.
The biggest irony of all? Dimon reports that his daughter owns Bitcoins.