JPMorgan Chase CEO, Jamie Dimon, is no fan of Bitcoin. This was made clear by comments he made saying that he would fire any employee he discovered was trading the currency. His main bone of contention is the fact that he feels that the cryptocurrency is a “fraud”. His sacking of employees for trading in Bitcoin is based on his belief that it would be a “stupid” thing to do.
The comments were made during an investor conference in New York. Dimon said “The currency isn’t going to work. 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.” He also added that the Bitcoin was “worse than the tulip bulb.”
The tulip bulb reference is a nod to a mania which swept through 17th century Holland. During the period speculators drove up the prices of tulip bulbs to extortionate levels. Those who sold the bulbs could generate profits of 400%. The public highly coveted these luxury items in Dutch society. However, the market sharply collapsed because ultimately tulip bulbs are worthless. Economists and historians believe this to have been the first incident of a market bubble.
Jamie Dimon believes that Bitcoin will suffer the same fate as the tulip bulb. While those living in troubled countries might be interested in using the currency, developed economies will not be as adaptive. He also notes that it also holds value for individuals or groups involved in criminal activity. However, he believes that there is limited scope for Bitcoin.
Dimon did not dismiss the technology behind Bitcoins. The bank chief differentiated between the currency itself and the blockchain technology which develops it. However, he believes that it will take quite some time for financial institutions to adopt the technology.
Bitcoin has seen a surge in growth in recent years. It first broke the $1,000 valuation mark way back in 2013, but a combination of factors — including the implosion of then-top exchange Mount Gox — saw the currency drop in value. Support from financial institutions trialed Bitcoin and blockchain-based services, and a general stability following new regulation in China, saw Bitcoin return to the $1,000 mark again at the end of last year. Since then, its valuation has continued to grow consistently through 2017.
This is part of the problem according to Dimon. Nobody knows how high it will go before it crashes. It lacks the central controls that national currencies are subject to. This is could further hamper the future of Bitcoin and other virtual currencies. Governments like having control of producing and disseminating currency. Central Banks and Federal Reserves are able to increase or decrease the amount of cash that they print, depending on economic situations. In times of economic crisis, governments have the ability to devalue a currency in order to alleviate debt. Without the central control of currency, it would appear difficult to imagine how governments would accept cryptocurrencies on a large scale level.