JPMorgan Chase Venture into Crypto

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CryptocurrencyIt’s hard not to smile at the news that JPMorgan Chase will be launching their own cryptocurrency which will be called “JPM Coin”. After all, in September 2017, their CEO Jamie Dimon said that Bitcoin, which was then (and still is) the world’s largest cryptocurrency, was a “fraud”. After calling it “worse than tulip bulbs” (a reference to one of the most famous price bubbles in human history, when a single tulip bulb might have bought a house in Amsterdam), he said “It’s not a real thing, eventually it will be closed… Currencies have legal support. It will blow up.”

There’s an interesting side issue here: whether Dimon was right, and why. When Dimon made these comments on 12th September 2017, one Bitcoin was trading at approximately $4,250. Its price at the time of writing was $4,114 – almost the same relative value, more than a year and a half later! Of course, the thirteen months following September 2017 saw Bitcoin inflate by 400% into a huge bubble which burst with a 75% depreciation from its high. So, it can be argued Dimon was at least partially right, in that Bitcoin was a bubble which burst – yet unlike the tulip, Bitcoin has not dwindled away to a negligible value.

Its also true that Dimon changed his mind pretty quickly, saying less than three months later that “the blockchain is real”. Its probably not a coincidence that at the same time he announced the launch of a global payments blockchain which would add value to payments processes. Finally, more than a year later, JPMorgan Chase rolls out its prototype coin (access is restricted) to facilitate its attempt to replace the SWIFT payments system. It will be interesting to see whether a major company can get their own cryptocurrency off the ground in a big way. Despite all the hype over Bitcoin, it has been more than one year since the bubble burst, and this is the first time a major U.S. bank has launched a Coin for direct use in business operations.

Adam is a Forex trader who has worked within financial markets for over 12 years, including 6 years with Merrill Lynch. He is certified in Fund Management and Investment Management by the U.K. Chartered Institute for Securities & Investment.