Headline:  Why is Jamie Dimon so against cryptocurrency investing?

Body:  So, due to physical limitations, I cannot drive.   Therefore, if I confidently told you that Exxon gasoline was qualitatively better than Shell gasoline, I hope that you might second-guess my opinion, as it is not based upon expertise.  But, if the owner of an independent garage told you the same thing, you might be excused for listening to him or her a bit more closely.  The reason is simple; The mechanic knows a lot about cars, and I know nothing.  In a similar way, if your neighbor was repeatedly talking excitedly about exotic kinds of cryptocurrencies, I hope that you might do some extensive research before plunking down a large amount of money.  So, what if a major player on Wall Street, Jamie Dimon, is urging caution about cryptocurrency, I think it might be worth it to hear out his reasoning.

So, who IS Jamie Dimon?

Mr. Dimon is the CEO of JPMorgan-Chase.  He has been working in the financial sector for decades.  His opinion occasionally moves markets.  And his opinion on Bitcoin is negative, calling it a “pet rock.”  Upon reflection, he did say that all useful employments for cryptocurrency were felonies, prosecutable in several jurisdictions.

I thought Bitcoin was used for good… not for evil

Well, no.  Cryptocurrencies have been used extensively in many kinds of schemes, including tax avoidance, money laundering and sex trafficking.  In fact, according to the GAO, 15 of the 27 sex websites they examined accepted digital currencies.  He cites all of these uses of crypto as reasons why it should not even exist.

So, is this a new thing for him?

No, this is not a new thing.  Over the years, he has been known to call investors in cryptocurrency, “stupid” and threaten to fire any employee who invests in it.  Normally conservative BlackRock and Goldman Sachs have both seen the excitement for cryptocurrencies and parted company  with Mr. Dimon on this point.  Mr. Dimon seems to often use language I am uncomfortable to use in print, but, Vanguard seems to agree with his views.   They synthesize their position as follows:

The investment case for cryptocurrencies is weak…Unlike stocks and bonds, most crypto assets lack intrinsic economic value and generate no cash flows.

Are there other reasons that Mr. Dimon dislikes cryptocurrencies?

Yes, there are several other reasons he has pointed to over the past few years.  The first argument that he made is that cryptocurrencies are a terrible store of value.  The main reason is, to be a good store of value, the valuation has to be relatively stable, and crypto certainly does not qualify here.  With prices changing thousands of dollars per day, his argument appears to hold water.  Second, he referred to Bitcoin as a fraud.  To a point he is right.    When you buy Bitcoin, what do you get in return?   Ones and zeroes on a computer screen, that’s it.  But, I might take a bit of issue with his thesis here, because cryptocurrencies are not the first new investments.  Imagine showing a stock certificate to a poor farmer in the 1930s.  I suspect what they might be thinking is, “If I eat that paper, will my stomach be full?”  Perhaps a similar thing might be going on here.

So, it’s a hard pass for him, huh?

Well, not quite.  During his time in the big chair, JPMorgan has begun to use blockchain technologies, most notably, to administer their JPM Coin.    Today, this coin is used to make trades of more than $1 Billion every day.   In point of fact, in 2017, he was quoted as saying, “God Bless the Blockchain.”  Blockchain is very attractive to Mr. Dimon, especially the smart contracts that are supported by the Ethereum blockchain.

The Verdict

In researching to write this entry, Mr. Dimon seems to be of 2 minds about cryptocurrencies.  On one hand, he abhors the “pet rock” of Bitcoin, but on the other hand, he has great faith in the smart contracts executable on the Ethereum blockchain.  So, it’s left to us to square that circle and reconcile the opposing views of digital assets.  Then, I read in one of the References, that Mr. Dimon’s expressed feelings about the assets might be “intentionally misleading” given his firm’s use of JPM coin and other blockchain technologies.  I have been swirling this in my mind, and would appreciate any of your comments.   But, my one idea is that he wants his firm to continue using these assets for as long as possible, and the key to this is to forestall government intervention.  By appearing to be negative on cryptocurrency, he might be giving the government a signal that it’s OK to go really slowly with regulation. 

Oh, and by the way, for all of you kids out there, a free tip; If the press does elect to interview you, please, please do not casually curse or refer to your potential investors as “stupid.”





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