Jamie Dimon Criticizing Bitcoin Shows How Cryptocurrencies Feed Off Such Actions
Jamie Dimon, JPMorgan Chase & Co.’s CEO, is in the news for criticizing bitcoin and stating that if he finds his employees trading bitcoins then he will fire them. In this day and age, where people praise cryptocurrency for the freedom it provides to its users, Jamie decided to call it a fraud.
That may not be his wises decision – we think his focus should be on JPMorgan providing its users with bitcoin alternatives of the same kind.
While criticizing bitcoin, Jamie compared it to tulips, otherwise known as the Tulipmania in Dutch in the 17th century. Charles Mackay wrote a book, published in 1841, titled Extraordinary Popular Delusions and the Madness of Crowds in which he talked about this concept.
He reported that people were buying only a single bulb for a very high cost in the year 1610. However, he was wrong because people were not buying single bulbs but a single variety, therefore buyers would own an entire stock – not single flowers.
Aaron Brown, author of “The Poker Face of Wall Street” writes: “A quarter century later, a futures market grew up around fractional interests in low-priced, ordinary tulip bulbs.”
Investment returns reached peaks in the Pre-Modern European era. 20%-30% returns noted per year if you were to partake in low risks investments. Still, in order to keep rich people rich and poor people below them, laws allowed only the merchant class to gain profit.
The story took a turn when Holland decided to allow “contracts for fractional interests”. This would aid the tulip bulb industry because it had become way too expensive, even for the wealthy classes. However, the lower class discovered the gap in early 1630s. Two things happened as a result: contracts became monetized and their value was now directly affected by demand for money as opposed to the use value before.
Within a year, the economy soared and such contracts increased by 20 times to the price charged on the actual bulbs. However, February 1637 brought an end to the Tulipmania once the market fell. The phenomenon was banned six weeks after the incident.
Comparing this concept to bitcoin is quite clever because bitcoin’s history certainly matched the rise in the price of the tulip bulbs. In 2009, people started using bitcoin to avoid “inflation, expropriation, taxes, use restrictions, financial repression and fees, especially for small and cross-border transactions.” Aaron also adds, “The economic value of these services serves as the underlying base of value, just like the value of tulip bulbs supported the tulip futures contracts. But bitcoin became monetized and its value far exceeds the current use value in transactions. Its value is now based on projected future need for protection against the problems it solves. If this be fraud, all money is fraud.”
Another point that Jamie detailed was that bitcoin will be banned or controlled by government because that’s what it does – keeps a hold on monetary happenings. But this will only happen if bitcoin’s value increases so as to appear in the “global money supply”.
If Jamie’s statement is altered to emphasize the idea that governments will try to control bitcoin because it helps people avoid taxes, then it makes a little sense. Users of cryptocurrency cannot be controlled by any individual or group. But will government really suppress cryptocurrency? In such a case, cash would have been banned a long time ago as it allows “evasion”. Apart from China, the strictest governments have stayed away from outlawing cryptocurrency. Potentially because they think that banning it could increase its value.
The difference between tulips and bitcoin is that bitcoin solves problems that will be present until an alternative solution is found… a solution like cryptocurrency. So, the wheels keep turning. This means that one way or another, cryptocurrency-related innovations will always be welcomed by the people.
However, if monetary institutions are ready to allow this phenomenon into their hold, they will come out as the winners in this digital race. Unlike Jamie, who promises to cut employees due to his personal views, quite a few companies are now looking to adopt this phenomenon.