Updated 9/22/17 – to address additional comments from Jamie Dimon
Early Tuesday, the Chief Executive of JP Morgan, Jamie Dimon, called Bitcoin “a fraud” and “worse than tulip bulbs.” However, as TechCrunch reports, the criticism is ironic considering the fraudulent and immoral actions of JP Morgan and other financial institutions which lead to the 2008 financial crisis.
In fact, Bitcoin was created in response to those substandard practices which crashed the market and started the Great Recession. At its core, Bitcoin eliminates the middleman, the bank, by providing a means to safely transfer money directly from one individual to another.
Bitcoin is a currency free of control by banks and governments. At first, these institutions gave it no credence, figuring Bitcoin to be a technology fad similar to the dot com bubble of the 1990’s. But to their surprise, adoption of the digital currency grew and spread across the world. What was once merely an annoyance had become a real threat. Decentralized currency threatened the strangle-hold banks and governments had on the value of currency and transfer of assets. Thus, the criticisms of people like Jamie Dimon merely reflects their fear of a currency that can’t be controlled or profited from. Simply put, it’s in their best interest to “refute” Bitcoin as they try to protect their monopoly.
If you’re not convinced that the motivations of financial institutions are self-serving, here are just a few reasons to illustrate why they are not to be trusted and how Bitcoin is changing the world.
Banks Exist to Make a Profit, While Bitcoin is the People’s Currency
Every dollar held in a checking or savings account is a vehicle for profit for banks. Account holders entrust their precious savings to banks and in return, the banks invest that money and make high-interest loans. The greatest source of profit for a bank is to lend money at rates higher than the cost of the money they lend. That’s why a checking or savings account comes at nearly no cost to the account holder – to the bank, your funds are their funds and they are going to use that money to bilk others with loans at high interest rates and astronomical fees.
As a false benefit, many banks will offer a 1-2% interest rate on savings accounts. You’ve likely heard advertisements for “cash back” and “rewards” for opening an account or holding a credit card with them. However, the math of such “benefits” can’t possibly offset the amount of money account holders pay in interest for loans. The house always wins and the math currency controlled by banks always works out in their favor.
Bitcoin removes the middleman and lets currency be exchanged person to person. Fees are limited to transactions at a minimal rate. Best of all, your funds will never be used in high interest loans to other people for profit. In the world of digital currency, your money belongs to you. Bitcoin operates on Blockchain technology, which is a system built on transparency. Every transaction is recorded on the public ledger. It’s an open-source system with honesty as its tenant, while still providing anonymity and security to users. The Blockchain ledger ensures that Bitcoin will always be a currency free from Wall Street corruption that brought about events like the subprime mortgage housing bubble.
“Comments like Jamie’s show a failure to grasp the significance of the blockchain and the power of brand in a fundamental sea of change,” said Scott Nelson, chairman and CEO of blockchain firm Sweetbridge.
Banks Cry Bubble Because They Are Threatened
A bubble is described as an asset driven by unwarranted market behavior, where an upsurge in price has occurred because of a false truth about an asset.
If there is a “false truth” to be found, it’s that digital currency is a bubble or passing fad. That’s the truth that traditional financial institutions want the world to believe. A successful digital currency means they will lose the ability to handle money and manipulate it to create profit. Bitcoin is a decentralized currency, which gives governments reason to fear it as well. If governments lose the ability to print money, they lose seigniorage income (benefits from printing money). Once they lose the ability to control money and manipulate its value, they lose control over the economy.
Bitcoin flies in the face of traditional economy. Decentralization means that currency and transactions belongs to the people. The more adoption of digital currency grows, the more people are taking control away from financial institutions.
Is it any wonder Jamie Dimon and other Wall Street people are spewing vitriol at Bitcoin? Of course they are, because their entire system of profit is being threatened.
Financial Institutions Have Acted Fraudulently
JP Morgan invested in subprime mortgages they knew to be faulty and likely to turn foul. When their fraudulent investments and actions came home to roost, it was the American people who had to foot the bill. Jamie Dimon’s company, JP Morgan, received a $13 Billion government bailout. The bailout makes Dimon’s cries of “fraud” fall flat. To the Bitcoin community, Dimon’s criticism simply misses the point of a decentralized currency.
For all of that, even a character like Dimon can recognize the revolutionary nature of blockchain technology.
“Blockchain is a technology that can be used for multiple things, including cryptocurrency. It could be used for digital dollars, and there are digital dollars already; a lot of the dollars held in our bank are digital,” Dimon said.
Bitcoin’s price has been volatile, reaching record breaking highs last month and then dipping down again recently amid fears on China’s ruling. But many experts see this as a great buying opportunity.
Bottom line: Regardless of fluctuation, nothing will change the foundation and true value of Bitcoin, transparency and decentralization. And that makes Wall Street nervous.