During JPMorgan's earnings call Thursday morning, Jamie Dimon made a promise: “I wouldn’t put this high on the category of important things in the world, but I’m not going to talk about bitcoin anymore.” Some attributed his newfound reticence to fear that cryptocurrencies will eventually make banks obsolete and relegate the Jamie Dimons of the world to obscurity, or maybe jail. Others figured he was just sick of being asked pesky bitcoin questions when there are more pressing concerns out there.
Whatever his motivation, it didn't take long for Jamie to renege on his word. Asked about bitcoin at a conference Friday – less than 36 hours after his no-bitcoin pledge – Jamie went all in. Here's a taste:
I don’t personally see any value in something that has no actual value. You can all do whatever you want, I don’t care. I could care less what bitcoin trade for, how it trades, why it trades, who trades it. If you’re stupid enough to buy it you will pay the price for it one day.
I have also told people that it can trade at $100,000 before it trades to zero. Tulip bulbs traded for $75,000 once, or something like that. The only value of bitcoin is what the other guy will pay for it. Honestly…a lot of the buyers are out there jazzing it up every day so that then you go buy it too. And take them out. I quite mean that, by the way. People are very good at manipulating the press these days. Every day now you see on CNBC, nonstop bitcoin. Who cares about bitcoin? I mean, you know, the world economy is so big. J.P. Morgan alone, we [move] $6 trillion, all that money, and bitcoin in total, all these currencies are $50 billion – maybe $1 billion in trades a day.
Echoing his previous commentary on cryptos, Jamie added that governments will eventually crush bitcoin and that it is not at all like gold, apparently because it hasn't “been around a long time.” Bitcoin also isn't a fiat currency, Jamie said, which makes its uptake less likely on a societal scale (e.g., no one wants to be compensated in bitcoins if they have to pay taxes in dollars).
As before, the only really novel part of Jamie's bitcoin critique concerns its viability of a currency. In the abstract, there's nothing special about that point. On Friday morning, for instance, UBS released a note whose conclusion was that bitcoin is a bubble, in part because it doesn't meet the two canonical requirements of a currency: that it be a store of value and a medium of exchange. Bitcoin is too volatile to be the former and too niche to the latter.
This argument has been made before, and it's not really Jamie's point when he talks about bitcoin as a poor currency. He's not bothered by bitcoin in the abstract so much as he is with its practical inability to make transactions cheaply and reliably. That's why Jamie always refers to how many dollars JPMorgan moves every day, as he did again here:
Who cares about bitcoin? I mean, you know, the world economy is so big. J.P. Morgan alone, we [move] $6 trillion, all that money, and bitcoin in total, all these currencies are $50 billion – maybe $1 billion in trades a day.
Jamie's crypto numbers are off here – bitcoin alone has a $92 billion market cap, and in the last 24 hours $3.6 billion in bitcoin changed hands – but his point stands. As a member of the Federal Reserve authorized to make dollars and a custodian of $1.4 trillion in bank deposits, JPMorgan runs a major chunk of the monetary plumbing in the U.S. Jamie knows intimately how much it costs to zip money around. He employs lots of people specifically to minimize those costs.
A crypto network looks a lot different from JPMorgan's dollar factory. Part of bitcoin's technical genius is the way it builds that plumbing into the currency itself. A decentralized ledger means every individual user becomes a node in the network, and no central counterparty is technically required.
This is a neat achievement, but it's also nightmarishly inefficient. Transaction times and processing fees have reached absurd levels as more people have bought bitcoin. See: Paying $15 to Send $25 Has Bitcoin Users Rethinking Practicality.
This is kind of banal and definitely less interesting that talking about the dangers fiat currency or the manifold evils wrought by mega banks. But if you're going to compete with JPMorgan, you're going to need efficiency. As it stands, one bitcoin transaction takes thousands of times more energy than a credit card purchase – enough to power the average American household for more than five days. And that's by design.
This is why bitcoin as a currency strikes Jamie Dimon as flatly absurd. Whatever its theoretical merits, bitcoin is not built to meet the demands of a modern currency. One could imagine a blockchain-based application that could pass muster, but it would stop looking like bitcoin and start looking more like what Jamie describes here:
J.P. Morgan moves $6 trillion around the world every day. We don’t do it in cash. We do it digitally. If we do it digitally through the blockchain, so be it. But it will be a dollar crypto currency.
Anyway, Jamie ended his tirade by re-promising to refrain from talking crypto from here on out, which means he had to get in a dig he's clearly been waiting to drop:
But this is the last time I am ever going to answer a question about bitcoin again. After I made that stupid statement [about bitcoin], and got all over the front [pages] my daughter called me and said, “Dad, I own two bitcoins.” My formerly smart daughter.
Must be fun to have Jamie Dimon for a dad.