“Honestly, I am just shocked that anyone can’t see it for what it is.”
Since the beginning of 2017, the price of Bitcoin has increased by a huge 320%, from $997 (£751) on 1 January to $4,148 (£3,126) on Tuesday’s close. The price reached an all-time high on 1 September. While the price has been gradually falling since then, the trajectory it has been on this year is almost continuously in the upwards direction.
But the long-term prospect of the cryptocurrency is not strong, according to Jamie Dimon, CEO of JPMorgan. Speaking at a conference, Dimon called Bitcoin a fraud worse than "tulip bulbs". This alludes to a market bubble that appeared in the Netherlands in the 1600s, which, at its height, saw the rarest bulbs priced at six times the average person’s salary.
One of the reasons Dimon is skeptical is because of the way Bitcoin works. Unlike other currencies, Bitcoin only exists on the internet and not in physical form.
“The currency isn’t going to work,” he said, at a banking conference in New York. “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.”
Dimon added the only people who would benefit from using Bitcoin are criminals. “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, you are better off doing it in Bitcoin than US dollars,” he said. “So there may be a market for that, but it’d be a limited market.
“Honestly, I am just shocked that anyone can’t see it for what it is.”
When asked what he would do if any JPMorgan traders bought Bitcoin, he said they would be fired. “It is against our rules and they are stupid, and both are dangerous.”
But other companies do not agree. While most banks have avoided trading Bitcoin so far, it seems it might be getting a place in trading desks soon. Exchange group CBOE has applied with US regulators to launch a Bitcoin futures contract and a Bitcoin exchange traded fund.
“Like it or not, people want exposure to Bitcoin,” said Edward Tilly, chairman and chief executive of CBOE, speaking at the same conference.
For any trade, two people need to disagree on their predictions, he added. ”So Jamie can be on the short side and the issuers and those trading in physical can be on the long side, and it sounds like we have a great trade.”
But Dimon predicted big losses for Bitcoin buyers, and he said he would stay away completely. “Don’t ask me to short it. It could be at $20,000 before this happens, but it will eventually blow up,” he said.
Dimon’s view is shared with the UK’s financial regulator, the FCA. Speaking about initial coin offerings (ICO), in which investors buy into something in Bitcoin, and are given a ‘coin’ representing their share: “ICOs are very high-risk, speculative investments,” the FCA said in a statement. “You should be conscious of the risks involved … and prepared to lose your entire stake.”
Source: http://www.alphr.com
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