Jamie Dimon is a very influential person. To be more precise, you could find him in Time’s lists of the World’s Most Influential People in 2006, 2008, 2009, and 2011. Accordingly, his words have an impact, and he knows that. Bearing this in mind, his choice of words for Bitcoin is very interesting.

For example, let’s go deeper into what he said about his traders. Dimon said he would ‘fire’ any JP Morgan traders who trade Bitcoin.

"It's against our rules and they are stupid," he said.

Well, that was sharp. In fact, by referring to his traders, he implied that everyone in the world trading Bitcoin is “stupid”.

It can be seen as a psychological trick in which Bitcoin is associated with something negative, and people assimilate this information at a subconscious level, without even realizing it.

By saying that he would fire his traders, he may have wanted to induce a feeling of guilt in Bitcoin traders around the world.

Since the Bitcoin market is at an emerging stage, even after a decade, many people are new to it and are unsure whether they should enter the crypto-space or not. This indecisive, but sizeable audience, went on the back foot after Jamie Dimon’s comments.

Jamie didn’t stop here; he went on to joke:

My daughter bought bitcoin, it went up and now she thinks she's a genius."

This again implied that Bitcoin traders are amateurs who may see gains, but in the end, they don't matter much.

JP Morgan and the 2008 Crisis

Are Jamie Dimon’s hands clean? What about the financial crisis of 2008? It was not the result of some unavoidable circumstances. The crisis was a direct consequence of a fraud, and JP Morgan was a part of that. The bank played with fraudulent mortgage derivatives at that time, and was part of a massive network of investment banks, rating agencies, politicians, and other players who perpetrated the fraud.

According to the Washington Post, JP Morgan was charged by the New York Attorney General and the regulator of Fannie Mae and Freddie Mac with more accusations, and here is one of them:

“Washington Mutual, Bear Stearns (both acquired by JPMorgan before the crisis), and pre-2008 JPMorgan itself "were negligent” in allowing into the Securitizations a substantial number of mortgage loans that, as reported to them by third-party due diligence firms, did not conform to the underwriting standards."

The Justice Department of the United States decided that JP Morgan should pay a penalty of $13 billion since “the bank knowingly sold securities made up of low-quality mortgages in the lead-up to the financial crisis."

So what about selling low-quality mortgage derivatives and fooling investors? Isn’t that fraud? Well, not really, because the US government will come with a bailout and no-one will go to jail. The bank can live on, at the expense of everyone else.

The irony is that JP Morgan Chase dealt with hedge funds to bet against the so-called toxic mortgages after the crisis had started. The bank generated profits by selling short on the financial disaster it had created.

Jamie Dimon on Bitcoin: "It's Just Not a Real Thing." 

JP Morgan’s CEO also seemed to be upset with the virtual nature of the cryptocurrency.

But can he give examples of “real things?” What about derivatives?

A derivative is a contract or security that is based on an underlying asset. In other words, you can think about derivative as a bet on commodities, stocks, Forex pairs, or any other asset. Big banks got deeply involved with derivatives as they were trying too hard to increase profits, forming, according to many experts, a derivative bubble that could burst.

Warren Buffett referred to derivatives as “weapons of mass destruction." He was right – the financial crisis of 2008 was caused by unregulated derivatives, mostly mortgage-based Credit Default Swaps (CDS), and Collateralized Debt Obligations (CDO). You see, the OTC derivative market is almost unregulated, yet banks want to point fingers at the cryptocurrency market.

To understand the scale of the derivative market, consider the fact that as of Q4 2016, JP Morgan Chase had almost 2.5 trillion dollars in assets, while its total exposure to derivatives was beyond 47 trillion dollars! How can an entity manage 2.5 trillion in assets and have exposure to 47 trillion? Maybe it’s because they don’t operate with “real things”?

Forget about the financial crisis of 2008, which was indeed caused by OTC derivatives. This unregulated market poses a serious threat even today. As of 2012, the total exposure to OTC derivatives worldwide was over $600 trillion, while the global GDP was only about $70 billion. It’s weird that Jamie Dimon is concerned with Bitcoin while sitting on an infinite pile of derivatives.

He went on to say that Bitcoin is like "...creating something out of nothing, that to me is worth nothing. It will end badly."

Why doesn’t he mention how derivatives are creating something out of nothing?

Bitcoin is as Real as the US Dollar…Maybe More

Bitcoin is a real thing as long as it has demand. Jamie Dimon just needs to apply the basic economic principles. It’s no different than the US dollar itself. When the US dollar was decided upon as a world reserve currency at the Bretton-Woods agreement in 1944, all the delegates agreed that gold should back it with the price of $35 per ounce.

In 1971, Nixon came and said that the US would no longer provide gold in exchange for dollar papers as initially agreed (the so-called Nixon shock).

So, how come the US dollar is still “real” today? It’s because demand is still there. It is true that the US had dealt with the Saudis and other oil producing countries so that they sell oil exclusively in exchange for the USD. This obviously boosted demand, but the particulars don’t matter here – the key word is demand.

Bitcoin also has demand, whether Dimon likes it or not. But even more importantly, it’s no secret that the US used to print fiat money arbitrarily, shifting their economy to inflation-based Keynesian principles.

This is why the USD has lost almost 96% of its purchasing power since 1913, the year when the FED came out. In comparison to this, Bitcoin is “more real” than Dimon thinks.

Besides, the CEO of the largest bank in the US should not be upset by the digital nature of Bitcoin, as the largest part of the USD supply is digital as well. M0 and M1 money supply refer to US dollar banknotes, coins, and other liquid equivalents easily convertible in cash. According to the Fed, M1 money stock is at $3.5 trillion as of today. But this is not the total US dollar supply. There is also M2 and M3, and even M4. M2 includes M0 and M1, plus less liquid money such as short-term time deposits and money market funds. According to the Fed, M2 money stock is $13.6 trillion as of today. So, more than 10 trillion dollars (the difference between M2 and M1+M0) cannot be converted to banknotes and coins at all – does it mean that this amount of money is not real?

But Jamie Dimon knows that the US dollar is created out of thin air, he just doesn’t like the fact that Bitcoin is not controlled by the government:

"Creating money out of thin air without government backing is very different from money with government backing."

Now we seem to understand his real problem – governing people is his concern.

Not Everyone Thinks Like Jamie

The good news is that there are many cryptocurrency supporters in the “big leagues."

According to Reuters: “The chief executive of Canada’s biggest lender, on Thursday pushed back on a suggestion by JPMorgan (JP.N) Chief Executive Jamie Dimon that bitcoin is a fraud, though he said the cryptocurrency needs monitoring.”

Even Lloyd Blankfein, Goldman Sachs CEO, showed interest in Bitcoin by tweeting: “Still thinking about #Bitcoin. No conclusion - not endorsing/rejecting. Know that folks also were skeptical when paper money displaced gold.”

And Christine Lagarde, Managing Director of the International Monetary Fund (IMF) was confident about cryptocurrencies: “I think it may not be wise to dismiss virtual currencies.”

The whole debate about Jamie Dimon was nicely concluded by Brock Pierce in an exclusive with Cryptovest, where he said:

“I think Jamie Dimon is doing exactly what Jamie Dimon is supposed to do. He is the CEO of one of the largest banks in the world...and this (blockchain and crypto) as an industry is a potential threat to his business...and as a fiduciary it’s his job to do what he is doing and I think he is doing a very good job of it.”