Back in October, about a month after he called Bitcoin "a fraud", Jamie Dimon responded as follows when a moderator at an Institute of International Finance conference pressed him on the subject of cryptocurrencies:
If you're stupid enough to buy [Bitcoin], you'll pay the price for it one day.
Bitcoin was sitting at roughly $5,600 when he made that comment. Fast forward two months (to the day) and Bitcoin was above $17,000. Three days after that, it was at $20,000.
"Who's 'stupid' now, Jamie?", was a common refrain on crypto subreddits.
Despite the fact that Bitcoin is some 50% below its December peak, there's still no shortage of gloating. The crypto crowd still thinks they're having a laugh at Dimon's expense.
But they're wrong.
The fact that Bitcoin skyrocketed after Dimon's comments doesn't mean the people buying aren't "stupid". It just means that Jamie had bad timing. Too often, people draw a false equivalence between "smart" and "making money". True, if what you're talking about is investing, "smart" is generally couched in terms of how much money you've made, but people make money on stupid investing decisions all the time. There are innumerable cases where the only difference between the idiots and the "geniuses" is that the "geniuses" got out in time. Sometimes that's by design and sometimes it's just luck and in the latter case, those lucky someones are no less stupid than the people who held on and lost it all.
There's a veritable laundry list of reasons to believe that Dimon is right when it comes to calling people who put their money into cryptocurrencies "stupid". His "fraud" allegation vis-a-vis Bitcoin is another animal, so I'll leave that aside.
Here are some reasons why it's fair to call people who "invest" in cryptocurrencies "stupid" (and give me some rope on these - that is, spare me the attempts to nit-pick by pointing to this or that characteristic of this or that coin that might warrant an exemption from one of these criticisms):
- governments are wary of the whole thing and although tolerance varies from country to country, the regulatory push is gaining momentum across the globe
- there is no salvage value if they go to zero
- there are no investor protections in place
- there is no underlying rate of return
- the volatility is insane
- there is no fundamental thesis (other than "this is the future") so the price action is dictated entirely by the greater fool theory
- they're in an egregious bubble the likes of which the world has literally never seen before
- they're vulnerable to hacking and thus to theft
So you know, "just" all of that.
Well on Friday, everyone got another reminder of how very real the hacking risk is is when Coincheck, one of Japan's largest crypto exchanges, "lost" some $400 million in NEM tokens.
Now for one thing, that sentence is itself evidence of how absurd this whole thing really is. That is: what the fuck is a 'NEM token'? And further, how does one "lose" one? And further still, how does one "lose" $400 million of them? Or rolling it all up: how the fuck is it possible that there are things called "NEM tokens" that somehow become valuable enough to where there are $400 million worth of them that can go missing?
Here's Bloomberg to explain what NEM is:
Like Bitcoin, NEM is a cryptocurrency built on top of blockchain, but it uses a more environmentally-friendly method to confirm transactions, according to its website. Bitcoin mining requires significant computing power, while NEM says it does not.
Ok, got it. So it's bullshit too, only this version of bullshit doesn't require enough energy to power Argentina to mine it.
And for God's sake, if you're inclined to try and shout at me about how "NEM tokens" are real things and about how "if only I understood the backstory", just don't, ok? Just don't. Because none of this is real and to the extent $400 million of it was some semblance of real for people on Coincheck, it's now $400 million less real because according to the exchange, they don't know what happened to 500 million of these things. Here's Bloomberg again:
After hours of speculation, Coincheck Inc. co-founder Yusuke Otsuka said during a late-night press conference at the Tokyo Stock Exchange that the company didn’t know how the 500 million tokens went missing, but the firm is working to ensure the safety of all client assets.
So someone stole them. Someone made off with 500 million "NEM coins". Who steals a "NEM coin"? Who are the usual suspects there? Is this what the lineup down at the station looks like?
Just to be clear, this looks like the largest theft in the history of cryptocurrencies. And while everyone - including Japan’s Financial Services Agency - is "looking into it", the bottom line here is that anyone who ends up losing money needs to ask the Japanese government why they're allowing these exchanges to operate in the first place. This one was actually "unlicensed" (their request was pending), but why is Japan "licensing" this at all? Why would you encourage this? It's insane and it's going to sound so wildly ridiculous in retrospect that I'm not sure how anyone who sanctions it is going to recover from the reputational damage.
Anyway, until the world finally wakes up to why this is manifestly stupid, we're going to keep finding ourselves in this same position - right back scratching our heads on a Friday afternoon and wondering where things went wrong.
But do you know who isn't scratching his head right now? Jamie Dimon, that's who.
And if you asked him what he thinks about anyone who ends up losing money in this epic "NEM" heist, I can tell you what he'd likely say.