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JPMorgan's Dimon says bitcoin 'is a fraud' and will blow up

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: Jamie Dimon

Reuters  |  New York 

The Bitcoin economy, in perspective
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"is a fraud" and will blow up, Jamie Dimon, chief executive of Chase & Co, said on Tuesday.

Speaking at a bank investor conference in New York, Dimon said, "The currency isn't going to work. 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 said that if any traders were trading the crypto-currency, "I would fire them in a second, for two reasons: It is against our rules and they are stupid, and both are dangerous."

Dimon's comments come as the bitcoin, a not backed by any government, has more than quadrupled in value since December to more than $4,100.

is a digital currency that enables individuals to transfer value to each other and pay for goods and services bypassing banks and the mainstream financial system.

While banks have largely steered clear of since it emerged following the financial crisis, the has a range of people who support it, including technololgy enthusiasts, liberterians skeptical of government monetary policy and speculators attracted by its price swings.

"Like it or not, people want exposure to bitcoin," Edward Tilly, chairman and CEO of exchange group , said at the same conference.

CBOE has applied with U.S. regulators to launch a futures contract and a exchange traded fund on its venues.

Any good trade is started with a difference of opinion, Tilly 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."

Dimon may also be on the other side of another trade closer to home.

At another conference about two hours later, Dimon said that one of his daughters had bought some

"It went up and she thinks she's a genius now," Dimon said at the CNBC Institutional Investor Delivering Alpha Conference.

 

"WORSE THAN TULIP BULBS"

Banks and other financial institutions have been concerned over bitcoin's early association with online crime and money laundering.

The supply of is meant to be limited to 21 million, but there are clones of the in circulation which have made the market for it more volatile.

"It is worse than tulips bulbs," Dimon said, referring to a famous market bubble from the 1600s.

and many of its competitors, however, have invested millions of dollars in blockchain, the technology that tracks transactions. Blockchain is a shared ledger of transactions maintained by a network of computers on the internet.

Dimon said such uses will roll out over coming years as it is adapted to different business lines.

Financial institutions are hoping blockchain can be adapted to simplify and lower the costs of processes such as securities settlement, loan trading and money transfers.

Dimon predicted big losses for buyers. "Don't ask me to short it. It could be at $20,000 before this happens, but it will eventually blow up." he said.

"Honestly, I am just shocked that anyone can't see it for what it is."

Bitcoin's price fell as much as 4 percent following Dimon's comments and was last trading at $4,164. Rumors that the Chinese government is planning to ban trading of virtual currencies on domestic exchanges has weighed on recently.

"It feels like we are in the midst of a negative news cycle, but even considering all this, we are still trading above $4,000." said John Spallanzani, chief macro strategist at GFI Group.

First Published: Wed, September 13 2017. 19:47 IST
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