Bitcoin seems to elicit sharp reactions from people, but this might’ve been the first time a prominent figure has gone on to call it “a fraud.”
Jamie Dimon, the CEO of JP Morgan Chase, has called the flagship cryptocurrency a “fraud” at an investor conference in New York. Dimon didn’t stop there, going on to say if any JP Morgan trader invested in bitcoin, he’d terminate them for being stupid. “I’d fire them in a second. For two reasons: It’s against our rules, and they’re stupid. And both are dangerous.”
He also went on to compare bitcoin’s heady rise this year to the infamous Tulip mania. In the 1600s, the prices of Tulip bulbs had risen to extraordinarily high levels in the Netherlands for no explicable reason. Things became so bad that at one point, a bushel of tulip flowers was trading at 10 times the average annual income of a craftsman at the time. A few months later, prices collapsed to their original values, ruining many speculators.
Bitcoin, too, has had a spectacular run this year, rising nearly 300% since January. While bitcoin’s blockchain technology is undeniably impressive, critics have voiced concerns about its feasibility as a means to replace regular currency. For one, bitcoin’s network at the moment can only support around 7 global transactions per second globally. Card companies such as Visa and Mastercard, on the other hand, perform as many as 2,000 transactions per second during peak times. Also, the fees associated with bitcoin transactions is rising steadily — in order to buy a $2 dollar cup of coffee with bitcoin, you’ll be forced to pay nearly 50 cents in fees, which would make small bitcoin transactions infeasible.
And most importantly, wild fluctuations in Bitcoin’s value mean that people are hesitant to make larger purchases using bitcoin. If someone had bought a TV at the beginning of the year and paid with bitcoin, they’d feel pretty stupid, because bitcoin’s price has risen four times since then.
There have been other concerns around bitcoin as well. Earlier this month, China had banned ICOs, causing bitcoin’s price, which had touched $5000, to fall to $4000 in a matter of days. ICOs are Initial Coin Offerings where a new bitcoin-like currency raises money, and even elderly grandmothers were beginning to attend these events, sparking fears that they didn’t completely understand the risks around the investment.
While Bitcoin has its positives too — the transactions are hard to trace and completely outside the ambit of any government machinery — Dimon said that this made it a preferred means of exchange for murderers and drug dealers. Indeed, most transactions on the Dark Web around drugs and weapons currently occurs through bitcoin. Even the infamous WannaCry hack had demanded money in bitcoin from users in order to recover the files that had been locked.
And while this isn’t the first time Dimon has criticized the currency — he’s previously said it “wasn’t going anywhere”, and it was a poor store of value — bitcoin fell by 11% following his latest comments.