After JP Morgan CEO Jamie Dimon sensationally labeled Bitcoin a ‘fraud’ last week, the founder of the world’s largest hedge fund, Ray Dalio, has also come out against the cryptocurrency calling it a ‘bubble’. However, it seems like banking’s old guard does not put their money where their mouth is.
The Dimon Dilemma
JP Morgan CEO Jamie Dimon heavily attacked Bitcoin last week calling it a ‘fraud’ and even went as far as saying that he would fire any of his bankers if they indulged in trading of the cryptocurrency. Financial blog Zerohedge, however, had questioned the veracity of his remarks since the bank indulged in Bitcoin trading. A JP Morgan spokesman declared on Monday that although the bank did not take positions on the instrument with its own capital but instead routes the orders electronically to exchanges, he conceded that they had been “routing customer orders for bitcoin-related instruments”.
With people wanting greater exposure to Bitcoin, a lot of prominent Wall Street banks such as Morgan Stanley, Goldman Sachs, and Credit Suisse act as brokers for buyers and sellers of Bitcoin XBT on Nasdaq’s Stockholm-based exchange, according to Swedish online bank Nordnet AB. Most of these banks have even incorporated Blockchain related projects and are in the market for technicians who have sound knowledge of the technology underlying cryptocurrencies. Mint Partner’s Bill Blain even claims that a lot of people have heard JP Morgan bankers bragging in pubs about how much they’ve made from holding Bitcoin.
Same Old Same Old?
In light of these developments, the words of Dimon and others from the old guard of banking seemingly appear hollow. It points to a broader pattern: whenever Bitcoin prices rally strongly, a Wall Street hotshot gives an interview warning about the cryptocurrency, predicting its impending crash. These Wall Street giants all have at least one thing in common – they are old, don’t understand technology, and have little to no knowledge of how cryptocurrencies really work.
Despite their cynical claims, Bitcoin holds it own and gains prominence by the day. This is precisely why when Bridgewater Associates founder Ray Dalio, who manages nearly $160 billion in hedge funds, became the latest Wall Street old guard to criticize the cryptocurrency calling it a ‘bubble’, not many were left amused. It was expected – more of the ‘same old-same old’ – since all his unoriginal arguments and myths have already been previously debunked by the Bitcoin community.
Rainer Michael Preiss, executive director at Taurus Wealth Advisors, points out that US bank CEOs are highly likely to be afraid of Bitcoin. In an interview with CNBC, he said:
Of course, if you run a very large U.S. bank, most probably you are afraid of blockchain and Bitcoin.
With detractors continually lambasting cryptocurrencies as ‘volatile’ and a ‘weak store of value’, Preiss suggests that the real reason for these repetitive monotonous attacks on cryptocurrencies actually stem from uncertainty around the current banking system’s lack of transparency.
This could make cryptocurrencies a viable alternative for investors as blockchain technology records every transaction that occurs in the digital ledger, making it completely transparent.
The concerns are about the fractional reserve banking system, and the balance sheet of the Federal Reserve at $4.5 trillion, where the Fed officially refuses an audit. On the other hand, on the bitcoin blockchain, you have an audit every day because it’s open-sourced.
Whatever be the future of Bitcoin, one thing is for certain: people who talk about it in the news seem to either love it or hate it, there is no middle-ground.
What do you think about Wall Street’s old guards constantly trashing Bitcoin? Do you agree with Dimon or do you think he makes untrue, heavily biased claims? Will Bitcoin prove to be a scam or a revolutionary cryptocurrency in a decade’s time? Let us know in the comments below.