JP Morgan: Bitcoin Futures Likely to Lend Legitimacy to Bitcoin as a Store of Value

In a surprising development for the international holding company, JP Morgan have announced that Bitcoin could be on the verge of turning into a more traditional asset class. Analyst Nikolaos Panigirtzoglou at the financial powerhouse told the Telegraph that the CBOE Global Markets and CME Group proposals to offer Bitcoin futures

 … has the potential to elevate cryptocurrencies to an emerging asset class.

To those who’ve been following the stance of the JP Morgan executive towards Bitcoin, the sentiment may come as a surprise. Earlier this year, the CEO of the international financial institution, Jamie Dimon, lambasted Bitcoin and cryptocurrencies with allegations that they were a “fraud” and they were destined to end up like the famous tulip bubble in 17th Century Holland in which many traders were burned. He even went as far as to say that any of his employees trading Bitcoin would be fired.

Thanks to recent positive developments, Mr Panigirtzoglou thinks the Bitcoin market might be maturing:

“The prospective launch of bitcoin futures contracts by established exchanges in particular has the potential to add legitimacy and thus increase the appeal of the cryptocurrency market to both retail and institutional investors.”

The analyst at JP Morgan likened Bitcoin to other stores of wealth such as gold. He went on to suggest that based on gold’s history, the world’s most famous cryptocurrency could see further growth.

Thanks to gold’s much greater market capitalisation and trading volume, Panigirtzoglou thinks there is plenty of room for Bitcoin to grow. He cited the total crypto market cap of $300 billion and compared this with the $1.5 trillion in gold outside of central banks control.

He did warn, however, that the rise was not guaranteed. When considering factors that could influence the price negatively, he cited other cryptocurrencies that might be more compliant with regulatory requirements:

“Any given cryptocurrency does face competition from other cryptocurrencies and this poses a risk to their individual valuation… The valuation of bitcoin for example is affected by other digital currencies that compete for acceptance, often claiming to offer better technical, security or transactional characteristics. Some of them could even gain advantage in the future by offering better compliance with regulatory requirements.”

 

 


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Speaking at an investor conference in New York on Tuesday, JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon blasted Bitcoin in a series on damning statements. Calling the cryptocurrency a “fraud” that’s “worse than tulip bulbs”, he went on to say he’d fire any employee trading Bitcoin “in a second”. He gave the following concise reasons: “It’s against our rules” and “they’re stupid”. He concluded that both cases were “dangerous” to his bottom line.

When Dimon refers to tulips, he means the market crash that affected the horticulturists of Holland in the seventeenth century. Speculators drove the prices of tulip bulbs to astronomic levels, some scholars claim as much as ten times an annual skilled worker’s salary for a single bulb. The “bubble” eventually burst, largely due to the hugely dubious nature of trades occurring on the ramshackle effort at a futures market that had sprung up around the industry. The spectacular crash in the price of tulip bulbs in 1637 that followed is often cited as the history’s first economic bubble. It’s also trotted out by just about every vocal anti-crypto-type going.

However, Dimon had more for Bitcoin than just vague language (“fraud”?), and talk of inflated tulip bulbs. He went on to highlight his doubts about future regulatory measures against cryptocurrency. He spoke of concerns regarding the lack of state control over the asset and warns of government intervention. “Someone’s going to get killed and then the government’s going to come down.” He has cited the recent clampdown in China as evidence to back up his claims, concluding “governments like to control their money supply.”

Expressing sentiments that seem straight from 2015, the chief executive dismissed the huge legitimate economy that has emerged around Bitcoin since its early shadowy past:

“If you were a drug dealer, a murderer, stuff like that, you are better off doing it in Bitcoin than U.S dollars. So, there may be a market for that, but it’d be a limited market.”

Such a stance might come as a surprise to those familiar with the Enterprise Ethereum Alliance. The JPMorgan logo has been proudly displayed amongst the rest of the “who’s who” of global corporations making up the much-lauded group. However, Dimon did comment on blockchain technology more generally too. He confirmed that there will still be great use cases for the protocol, particularly in the banking sector but it “won’t be overnight”.

All that said, Dimon, did finish by saying that his “daughter” had purchased some Bitcoin…

Ref: Business Insider | Bloomberg | Image: Alexas_Fotos (License CC0)

The growing popularity of Bitcoin as a powerful transaction tool and its ability to bank the unbanked has finally started making enough noise to wake up the traditional banking giants. Banks and financial services companies have been enjoying monopoly over the “money-moving” business for a long time, since its inception. Their only competition so far has been other companies delivering similar services. Not anymore, as the impact of Bitcoin on the banking sector is now being openly acknowledged by Jamie Dimon, CEO of JPMorgan Chase in his recent letter to shareholders.

Banking the Unbanked

In the letter, while discussing the strategy and outlook, Jamie has outlined the challenges posed by Bitcoin along with startups working on banking alternatives, merchants developing their own networks, PayPal and services similar to PayPal to traditional banking business. It is not possible for traditional banks like JPMorgan Chase to provide real-time payment processing and there is a cost involved in moving money through traditional banking systems. Newer technologies like digital wallets and Bitcoin protocol have an inherent advantage over these things. With bitcoin, transactions happen in real-time and money can be transferred to anywhere in the world within minutes. In addition, the cost of transactions over the Bitcoin network is negligible in comparison to traditional options.

The Banking Industry’s Worst Nightmare

While Jamie expresses his annoyance and pledges to fight the odds to stay on top of the competition, the message of this letter clearly showcases the banking industry’s fears. He had expressed his concerns over the emergence of new age alternatives to the investors over a year ago, since then the threat has grown in size, causing panic in the banking sector. In order to stay in business, banks will have to innovate fast and push the countries to adopt digital currency. In this fight between David (Bitcoin services) and the Goliath (Traditional Banking), we have to see who will emerge victorious.