What To Make of J.P. Morgan’s Flip Flopping on Bitcoin and Crypto
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What To Make of J.P. Morgan’s Flip Flopping on Bitcoin and Crypto

6 Minuten
1 year ago

Jamie Dimon loves to hate Bitcoin — and J.P. Morgan thinks Bitcoin could reach $146,000. How does America's largest bank really feel about crypto?

What To Make of J.P. Morgan’s Flip Flopping on Bitcoin and Crypto

Inhaltsverzeichnis

Introduction

America’s largest bank — J.P. Morgan — recently announced that Etherereum was better than Bitcoin. Earlier than that, the same bank had said Bitcoin had a fair value of $35,000 per BTC (but predicted $73,000 to be “reasonable”).
Yet in October 2021, only two months before, Jamie Dimon, their CEO, declared Bitcoin worthless. What's with J.P. Morgan Chase & Co.’s seemingly schizophrenic attitude towards crypto? It should be noted that Jamie has long liked to try and poke holes in Bitcoin’s legitimacy, calling crypo a scam on numerous previous occasions. (Although he Dimon will probably be quiet for a bit after his most recent kerfuffle, a joke about China that not surprisingly badly backfired)

J.P. Morgan and its key individuals have a history of approaching Bitcoin (and other cryptocurrencies) with skepticism. So why do they slag off the world’s leading cryptocurrency, while simultaneously putting out research that supports it?

J.P. Morgan claims that Bitcoin is replacing the use of gold as a hedge against inflation. Does the bank’s changeable approach to cryptocurrency illustrate a general conservatism towards Bitcoin and its competitors, or does it highlight a more sinister opportunism to manipulate mainstream sentiments on crypto? Let's take a closer look:

Pretty much anyone involved in the cryptocurrency ecosystem has heard someone reject the technology out of hand, either out of sheer ignorance or the supposed mass money laundering it facilitates (fact check: a fraction of crypto is used for illicit purposes, which cannot be said of good old cash).

Indeed, we've all endured comments from no-nothing naysayers who make claims like “it will be worthless some day” or “just remember, it isn't real money until it's cash in hand”.

These individuals usually have very little grasp on the actual technology (and usually don't understand that many crypto enthusiasts have already quantified the associated risks). In 2021, converting crypto to cash and getting it into your bank account is as easy as logging into your online banking app, once you’ve completed the necessary compliance checks. And it's scaring banks, who as intermediaries have to watch as their raison d'etre, to manage your money and take a nice cut each month, is slowly becoming obsolete.

Still, banks are entrenched in the current financial system and enjoy the patronage of governments worldwide, who in turn dictate regulatory policy for the crypto industry. Therefore, crypto enthusiasts still have to pay close attention when a major financial figure makes a similar statement.

So on Oct.11, 2021, when J.P. Morgan CEO Jamie Dimon stated that Bitcoin is worthless and overdue for regulation, it made headlines in almost every financial publication. Conversely when J.P. Morgan, the company he represents, announced services that support Bitcoin for its investors it attracted similar attention. investors, tech enthusiasts, and crypto bros were left scratching their heads at this near Orwellian doublespeak. Should we just banish it to Room 1011 and move on?

Understanding this question requires readers to understand J.P. Morgan’s changing, disparate opinions on Bitcoin. Should we take their flip flopping seriously? And how much do their influence still matter?

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Who Are J.P. Morgan Chase & Co?

Saying that J.P. Morgan Chase & Co. is a big bank is an understatement. With over 225,000 employees, offices in almost every country, a 2020 revenue of over $119 billion and controlling $3.86 trillion in assets, J.P. Morgan is the largest bank in the USA.

Formed in 2001, J.P. Morgan is a bulge bracket bank focused on multinational investments. The scale and size of J.P. Morgan Chase & Co. make them incredibly influential — therefore, they have a genuine ability to affect people's opinions on assets like Bitcoin or Ethereum. That being said, J.P. Morgan is also a very traditional bank with very strong ties to the centralized, traditional economy. They are accustomed to traditional investments, and seek to generate profits for their clients and are therefore inclined toward conservatism.

Despite this, J.P. Morgan joined a growing list of American banks rolling out crypto services.

J.P. Morgan and Bitcoin — A Confusing History

  • In April 2021, J.P. Morgan registered a Bitcoin fund with the SEC, encouraging investors to consider adding Bitcoin to their portfolio.
  • On Nov. 4, they renewed a former prediction that Bitcoin would double in value to $146,000 in the long term. Conversely, they stated that Bitcoin’s volatility would only create a fair price of $35,000 on average.
  • Ironically, on Oct. 11, J.P. Morgan CEO and billionaire Jamie Dimon made his most recent in a barrage of controversial crypto statements. He claimed that Bitcoin was worthless and overdue for regulation.
  • J.P. Morgan stated that Bitcoin’s current success was due to it being used as a hedge against inflation.
  • On Nov. 25, J.P. Morgan said that Ethereum could be a better investment than Bitcoin

Jamie Dimon’s Statements

It is important to remember that while influential, Jamie Dimon is a private citizen and his statements in October don't necessarily reflect the position of J.P. Morgan as a company. In interviews regarding the statements, Jamie also said that he doesn't advise people to smoke, but leaves his clients to make their own decisions. Overall, Dimon’s repeated messaging is concerned with the lack of regulation surrounding Bitcoin and other cryptocurrencies.

Bitcoin as a Hedge Against Inflation

Inflation is at a 13-year-high in the United States, leading many market watchers to predict that Bitcoin will hit $100,000 before the end of 2021. This is because Bitcoin is being used as a hedge against inflation similar to the way gold is used — as a safe haven asset.
An analyst for J.P. Morgan wrote, "digital assets have emerged as a clear winner in the post pandemic, with retail investors joining institutional investors such as family offices, hedge funds and real money asset managers including insurance companies in propagating the asset class."

If the large-scale acceptance of Bitcoin as an alternative for gold takes off, it will be a boon to Bitcoin's credibility.

Is JPM Right? Is Ethereum Better than Bitcoin?

What's behind J.P. Morgan's announcement that Ethereum (ETH) may be a superior investment to Bitcoin?

  • The key to this argument is based on the fact that the value of ETH has risen more than 500% in 2021. This is compared to a 96% rise in the price of Bitcoin.
  • ETH is the world's second most valuable cryptocurrency, and has numerous technological applications. Indeed, it is used as the platform for non-fungible tokens (NFTs) and is playing a crucial role in the decentralized finance (DeFi) industry.
However, Ethereum is also currently beset with problems due to the fact that its proof-of-work (PoW) network cannot handle the load of transactions. This has led to skyrocketing gas fees and congested network speeds that has sent both developers and users to cheaper and faster layer 1 network alternatives like Solana, BSC and Avalanche, and forced Vitalik and company to try and use layer 2 solutions to scale in the short term, such as his newly proposed Ethereum Improvement Protocol (EIP) 4488.

Conclusion

While outwardly confusing, J.P. Morgan’s statements and positions reflect the volatility of the cryptocurrency market and the pressure and conflict that financial institutions, long at odds with this new killer technology, are feeling to get in on the action before their customers do it for them.

Crypto has existed well over a decade, but J.P. Morgan has been in the game for only a short while. Therefore, it stands to reason that J.P. Morgan is stuck striking a balance between wanting to give good financial advice, allowing their customers to make their own decisions and adapting to a rapidly changing crypto environment. Veteran investors in the crypto market are accustomed to a degree of volatility and unpredictability regarding the price of their assets. J.P. Morgan currently seems to be caught on its back foot.

In the end, the most important factor is the fact that the largest bank in America is paying attention and that they’re making careful forays into offering crypto services for their customers. Whether you're a crypto enthusiast or a skeptic, if J.P. Morgan Chase & Co. is paying attention to crypto, then you should be too.

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