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9.13.17 - JPMorgan Chase CEO Jamie Dimon cut loose on bitcoin at a financial services industry conference in New York on Tuesday, according to American Banker, calling it over-inflated and a refuge for criminal proceeds before saying he would fire any JPM trader who thought it was a good idea to invest in the cryptocurrency.
Noting that the value of bitcoin has soared in the past year to $4,000 from just $600, Dimon promised that a reckoning is on the way. “Eventually it will blow up,” he said. He called bitcoin a fraud that is only a practical investment “if you are a drug dealer or a murderer.”
He went on to compare the market in bitcoin to the infamous Dutch tulip bulb bubble from the 1600s, calling investing in the digital currency “stupid” and promising, “If we had a trader who traded bitcoin, I’d fire them in a second.”
Dimon isn’t alone on Wall Street. Bank of America’s September survey of fund managers, released Tuesday, for the first time added bitcoin as a possible answer to question asking respondents to identify the “most crowded” trade in the market. The cryptocurrency promptly leapt to the top spot.
In afternoon trading, bitcoin continued a recent slide, falling 6.5 percent to a three-week low of $3,953.
So. Does this mean it’s time to buy bitcoin?
That’s not as flippant a question as it may seem. To be sure, Dimon didn’t get to where he is by having bad instincts about the markets. But at the same time, bitcoin investors didn’t realize triple-digit returns on their investments over the space of 12 months by listening to people like the JPMorgan Chase CEO.
For example, Joon Ian Wong at Quartz offers this handy chart, juxtaposing Dimon’s previous warnings about investing in bitcoin with the currency’s actual performance. The short version? If you had invested your life’s savings in bitcoin every time Dimon told you not to, you’d have a lot more money than you do right now.
Dimon may well be correct in claiming that the world’s largest and most well-known blockchain-based currency is headed for a comeuppance. In fact, looking at the currency’s extraordinary growth over the past year, virtually any traditional market analyst would have to agree with him.
The problem is that traditional analysis of bitcoin has been pretty consistently wrong for years now. That’s because, despite the crowds of “experts” willing to show up on television to talk about bitcoin, nobody really understands how to value it or whether it will even be around in five years.
The confusion about cryptocurrency is made manifest in the pages of the New York Times today. On the one hand, the paper covers the Chinese government’s ongoing crackdown on cryptocurrencies in general and a recent warning from the UK’s Financial Conduct Authority about the “very high risk” of investing in new issues. On the other, it presents a splashy photo-feature on a massive bitcoin mining operation in Inner Mongolia that produces hundreds of thousands of dollars in cryptocurrency every day.
So, back to the question. Is it time to buy bitcoin? The conservative answer is “No.” But that’s always been the conservative answer. What’s the right answer? Nobody knows. Including Jamie Dimon.
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Today’s Key Reads
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In China’s Hinterlands, Workers Mine Bitcoin for a Digital Fortune
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Pandit Says 30% of Bank Jobs May Disappear in Next Five Years
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Some U.S. banks already comply with new class action, arbitration rule
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