Is Bitcoin a virtual bubble that’s about to burst, or a dependable safe haven that can withstand market turbulence and economic uncertainly?
Opinion is unquestionably divided, but the head of one of the world’s biggest banks is emphatic that the digital currency that’s been skyrocketing up is certain to come crashing down.
At a Barclay’s global finance conference in New York on Wednesday, Jamie Dimon, Chairman and CEO of JP Morgan Chase, slammed the digital currency as a “fraud” and “worse than tulip bulbs,” referring to the “tulip mania” of 17th century Holland, when the price of the flowers reached irrational highs before crashing with devastating consequences.
The tulip phenomenon has been described as a kind of rare “social mania,” and, to Dimon, Bitcoin is no different.
“Don’t ask me to short it,” Dimon said. “It could be at $20,000 before this happens, but it will eventually blow up. Honestly, I am just shocked that anyone can’t see it for what it is. You can’t have a business where people invent a currency out of thin air and think that people who are buying it are really smart.”
Dimon acknowledged, however, that even his daughter thinks he is missing something, as she bought some bitcoin and has profited handsomely. “It went up and she thinks she’s a genius now,” he said.
Of course, Dimon sees cryptocurrency more as the financial tool of sinister global criminals, and not investors and gamblers who treat their digital cash like gold.
“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,” he said, “you are better off doing it in bitcoin than US dollars. So, there may be a market for that, but it would be a limited market.”
Bitcoin vs. Paper Money
Yann Quelenn, an analyst at the online bank Swissquote, had a different explanation, telling the Guardian that cryptocurrencies were “a new asset class” and one that was “at war” with paper money.
“Central banks are keen to preserve their monopoly on money, something they will not let go of without a fight,” Quelenn said.
Plenty of analysts who disagree with Dimon were quick to point out that cryptocurrencies haven’t needed to be bailed out by the US government, as his bank has. To some, Bitcoin carries a “safe haven” element of value in an increasingly turbulent world.
Bitcoin was created in 2008, as a global recession was just starting to take hold. It came at a time when mistrust of central banks and national currencies was at its height. Its stratospheric growth, however, only has occurred in the past couple years, and to some extent has been driven now by media hype as much as geopolitical tensions around the world.
Some suggested that Dimon, symbolizing the financial establishment, has a vested interest in belittling Bitcoin, which saw its biggest drop in value after Dimon’s comments went viral.