WHO'S THE FRAUD?

In late 2017, the financial world was gripped by a speculative fever unlike any seen since the dot-com boom. Bitcoin was on a meteoric ascent, its price multiplying with breathtaking speed, having surged from under $1,000 at the start of the year to over $5,000 and it would hit a peak of almost $20,000 by December. Like, hate, or mistrust it, there was no avoiding Bitcoin now, and everyone from taxi drivers to Wall Street execs had an opinion on the once-obscure cryptocurrency.

Fund managers watched with a mixture of envy and anxiety as this new asset class delivered returns that dwarfed anything traditional markets could muster. While Bitcoin’s believers relished the rollercoaster ride, poking fun at those who had dismissed it as a fad, “nocoiners” drew parallels with tulip mania and warned that BTC was in a bubble. Technically, both sides had a point: Bitcoin was indeed in a bubble but it was also on the verge of indelibly transforming global finance.

By autumn of 2017, Bitcoin had become too big to ignore. But for many of those whose business was threatened by Bitcoin sucking all the air out of the room, there seemed little choice other than to attack it. Politicians and fund managers had given their two sats on Bitcoin throughout the year, ranging from curiosity to skepticism. But up until September, Wall Street’s most feared and formidable chairman and CEO, JPMorgan Chase’s Jamie Dimon, had resisted the urge to weigh in publicly. That all changed on September 12 at a prestigious investor conference.

Afraid of a Fraud

When Jamie Dimon broke his silence it was with a declaration that would reverberate through global markets. Bitcoin, he pronounced, was a “fraud.” This out-of-hand dismissal of Bitcoin was pronounced, ironically, at the Delivering Alpha conference in the presence of hedge fund titans, managers of vast institutional funds, and asset allocators directing trillions of dollars of capital. His remarks appeared to briefly resonate, though, with Bitcoin’s price dropping by around 5% in the aftermath.

Dimon was addressing an audience tempted by Bitcoin's forbidden fruit and his message was unambiguous: don’t taste it. Like others before him, the JPMorgan CEO evoked the Dutch tulip mania of the 17th century, the most speculative bubble that ended in financial ruin. In case his feelings about Bitcoin weren’t clear enough, he added that “If you were in Venezuela or Ecuador or North Korea... or if you were a drug dealer, a murderer, stuff like that, you are better off doing it in bitcoin than US dollars.” If any of his own traders attempted to touch Bitcoin, however, “I'd fire them in a second.”

In a candid aside that day, Dimon revealed that his own daughter had bought into Bitcoin and “it went up and she thinks she’s a genius now.” She wasn’t the only Dimon getting in on the act either. Just days after calling Bitcoin a fraud, JPMorgan appeared on trading reports as one of the biggest buyers of a Bitcoin-linked instrument – a Swedish Bitcoin ETN – sparking accusations of hypocrisy. 

Revisiting Dimon’s remarks at face value, they read as the worst investment tip of the century. His prediction that Bitcoin would “eventually blow up” but could first reach $20,000 was admittedly correct, but in every other respect he was badly wrong. Moreover, at the same time as he was dismissing Bitcoin, it later transpired, his company was exploring the use of blockchain technology, which he praised shortly after his notorious “fraud” comment. As for Bitcoin, Jamie Dimon was to subsequently soften his stance. He wasn’t the only Wall Street big shot who would eventually see the light.