Jamie Dimon: “Buy Bitcoin, folks.”

Comment by Jamie Dimon on Paul Krugman’s weekly column on Bitcoin

Jamie Dimon
New York
Technobabble? “The Times They Are a Changin’,” (not the NY “Times”) As intelligent as Krugman is, his intellect may be stuck in the legacy financial system. Buy Bitcoin, folks. But like with any investment, only invest what you are willing to lose. Krugman’s negativity probably stems from a lack of understanding Bitcoin’s technology. Or he is closely associated with the Fed, banks and other financial institutions, all which hope to dissuade as they buy Bitcoin at suppressed prices. Or… he’s just “blocking up the hall.” 

I haven’t posted since May, 2018 because I didn’t have anything to say.  Bitcoin hit bottom (around $6k) three times since then and seems to be ever so gradually beginning to find a new footing.  Paul Krugman, an intellect I admire and trust, has unfortunately been unable to understand Bitcoin.  He almost systematically refuses to comprehend the advantages of a Bitcoin economy.  In his column, Transaction Costs and Tethers: Why I’m a Crypto Skeptic, NY Times, July 31, he continues to expound upon his misunderstandings.  Lo and behold, the first of the column’s comments comes from Jamie Dimon, CEO of J.P. Morgan, whom you might recall vehemently shouted “Bitcoin was a fraud.” less than a year ago.  His very visible “BUY” is important.  It goes along with other evidence that the cryptocurrency world is about to explode.

We’ve been waiting for the banks to build out the infrastructure they need to be able to profit from crypto.  Until the banks figure out how they can profit from crypto, Bitcoin isn’t moving anywhere, soon.  We’re almost there, now.  For banks to profit from the handling, holding and hawking of Bitcoin several utilities must be put in place.

There needs to be a good, strong, secure, easy-to-manage place for banks to keep customer accounts.  The software that does that is now readily available.  There needs to be ways for brokers to buy and sell cryptocurrencies for their customers profitably.  Speculation also requires additional instruments such as options and futures.  These are now in place, too.  There has to be a general consensus that crypto makes a good investment.  Here, the banks may have done such a good job of putting down crypto that it is not easily undone, at least not  quickly.  That’s where Jamie Dimon’s words become so significant.

Dimon says, in a Paul Krugman blog comment, “Buy Bitcoin, folks.” Krugman is not known for his crypto enthusiasm; quite the contrary to be sure.  He wasn’t asked or pushed to say anything.  Why bother?  Dimon has to undo years of negativity to launch this new banking endeavor.  I read another investment bankers recommendation telling customers, “You should have seven per cent of your portfolio in cryptocurrency.” Times are a changin’.  These are the signs I’ve been waiting to see.  I’ll be writing more about further developments in crypto in the coming days.

(?) To Be or Not To Be

Bitcoiin.jpgAt the core of the crypto- controversy “scam or new asset class?”, is a personal belief from which all else flows.  If you think that Bitcoin is a Ponzi scheme, everything which is generated from that essential belief only serves to confirm a negative opinion of cryptocurrencies. No amount of ‘evidence’ is going to dissuade one of these thinkers from believing bad things will ultimately updo Bitcoin.  The only problem for them is how to prove that the value of bitcoin will go to zero, even though Bitcoin hovers around the $10,000 mark.  If they wanted to profit by the misfortune of others, they might even purchase a Bitcoin short position.

On the other hand, if you believe Bitcoin is only the beginning of a new asset class, that hundreds, if not thousands of other cryptocurrencies will follow, that many of them will be widely traded and prove to be a very lucrative investment for those who bought in early, your problem is two-fold.  First, you have to prove that the value of bitcoin will go as high as one million dollars per coin, even though bitcoin presently hovers around the $10,000 mark.  Second, to take advantage of this glorious insight you have to choose in which cryptocurrencies to invest.

Ultimately, a sufficient number of use cases will prove the value of cryptocurrencies, or not. Be on the lookout for those.  Uses cases are the best argument you can make about in which cryptocurrencies to invest or if to invest in Bitcoin at all.

Bitcoin: Bubble Made of Mylar Not Soap

Soap-Bubble.jpgBitcoin stands at $8697 and has hovered around $8550 for the last twelve hours.  This has been the softest the cryptocurrency market has been since last summer.  Prices are still higher than they were at Thanksgiving time last year, yet coming down from highs around $19,500 the market doesn’t feel optimistic.  Broadly speaking the market has been plagued with bad news of late.  Governments are cracking down on cryptocurrency ICO’s, exchanges with bad trading practices are in the news and Facebook has put a ban on all crypto ads. The billions pouring into cryptocurrencies in hopes of making a fast buck have exited.  The entire cryptocurrency marketplace has fallen in lockstep with Bitcoin.

Yet, I can’t help but think what the naysayers that appear daily on Bloomberg and other financial talk shows speaking of Bitcoin going to zero and the “biggest bubble in human history,” are going to say when Bitcoin emerges from this episode in fine fiddle and goes on to bigger things. It is easy to see who understands what Bitcoin offers and who is clueless.

Bitcoin’s a bubble made of mylar, not soap.

#Bitcoin #BTC #ETH #LTC #XRP #crypto

Luddites

rotary.gif
gif by Rollin Bishop, Popular Mechanics

Perhaps, calling someone averse to new technology a Luddite is too harsh a term.  Luddites were trying to stop the advance of technology by destroying labor-saving knitting machines in 19th century England.  Today, we’ve come to use the word to mean a laggard, someone slow to adopt new technology.  There are several friends I consider true Luddites. These are the folks that confess an aversion to technology, only it sounds more like a condemnation. “I can’t even set the clock on my VCR.”

These are the folks that would ask me which PC they should buy, ten years after everyone else already had a computer.  Then, when Apple announced they were coming out with new models in the spring, decide to wait. When I showed off my new Kindle, these same folk would say something like “Nah, I want to feel the texture of the paper in my hands.”  That meant to me electronic books hadn’t come to Main Street yet.  These conversations have helped me gauge where we might be on the new technology adoption curve as I have been wondering about with Bitcoin. When Bobby says “I’m in” I know the technology has hit its cruising altitude.

So it frightens me when one of these same folk (I’m not mentioning any names) calls to find out how to buy Bitcoin. It seems that there is a new vape product he wants to buy but the dealer only accepts Bitcoin. Wow. It hasn’t been thirty days since the Thanksgiving dinner discussion when we had argued over the Bitcoin bubble. Had he purchased Bitcoin then, he’d never have to think about how much pot cost, ever again.

Now, what to think? Are we finished?  Is the run over already? Has Bitcoin reached its fighting weight?  Is this what the future looks like?  Or, is the adoption curve of this new technology so steep that we are going to see explosive growth ahead that will make this past month’s action seem like the calm before the storm?

I’m beginning to think that that is what we are facing. Just in the last few days, I heard about Cryptokitties.io, the online kittens you buy with Ethereum, which are so popular the sales have slowed the Ethereum network to a crawl.  There’s the eSports network switching to Litecoin for its sports gambling.  There’s the CBOE and CME (Chicago Mercantile Exchange) which have been heralded for the past couple of months. Their futures markets will bring Wall Street to Bitcoin.

Each of these is guaranteed to contribute a great deal of new, increased traffic to the world of cryptocurrency. Add to those the coming Ripple ala SWIFT network where banks will sign up to use Ripple to expedite International Wire transfers, Cob coins which will introduce to us fee-free trading of cryptocurrencies, and Electroneum which will replace energy-wasteful mining with mining on smartphones.  The list is seemingly endless.  There are already thousands of new crypto-coins being programmed and introduced.  Some won’t make it.  Many will.  This is going to be huge.

Why We Aren’t Using Debit Cards at Subway Turnstiles

MetroCard.SVGThe world of finance is changing.  When is the last time you wrote a check?  Could you find your checkbook if you had to?  When is the last time you used cash?  In Manhattan, where I live, the only time we use cash is when we leave the city or purchase something for under $5.  I get cash at an ATM once a month.  Remember when we were asked if it was a debit or credit card?  Not anymore.  I am seldom asked to sign receipts.  Swipe! The transaction is complete.

Paper and coin, what is referred to as fiat currency, is used less and less.  Most financial transactions are now virtual.  We store virtual currency in a virtual bank account which I inspect virtually, online.  I keep stocks and bonds in the same way.  If I want to pay someone from my virtual bank account I have the option of sending them a virtual check which they deposit in their virtual bank account.  If we ever need proof that the virtual money represents the ‘real’ thing, we go to the bank and ask to get paper and coin currency as proof.  But we seldom need to do that anymore, so comfortable are we with the concept of virtual money.

So why all the fuss over a new asset class, cryptocurrency, another form of virtual money?  “What is Bitcoin?” “What can you do with it?” “Bitcoin doesn’t represent anything.” These are the statements I’m hearing.  What is money? What can you do with it?  Buy things? What do you want to buy, a house? a car? You can do that with bitcoin now.  “What if it disappears?” “What if the government declares it to be illegal?” It won’t disappear.  It’s now a global phenomenon larger than General Motors or Walmart or Exxon Mobil.  Some countries did declare bitcoin illegal, at first.  Now most of them have changed their minds.  In fact, we will need this form of currency.  That’s the real story here.  Cryptocurrency works in a way that other currencies don’t.  It might be difficult to understand the differences, but understanding them is critical, and, explain why bitcoin isn’t a bubble or going away anytime soon.

Our culture uses computers more and more.  As we do, more and more programs have something to do with money.  Those automated computer programs working with money can do so in much more fluid, dynamic, and fast-paced ways than we can manually.  We can pay for renting milliseconds of machine-time.  We can make micropayments by the column inch.  If we drive through a congested area during peak traffic times, our EZPASS can pay a higher rate.  These are examples of dynamic financial transactions already in our daily lives.  There are others we NEED to be doing but our fiat currency won’t let us.

For example, why don’t we pay for the subway with our debit cards directly?  Why do we bother with Metrocards?  The answer is: credit and debit cards cannot understand the dynamic purchases that we make.  How can we pay for a monthly subway pass at the turnstile with a debit card?  Not possible.  The turnstile would not know the difference between a one-time purchase and a monthly purchase.  But with a Metrocard, the system can look up your account and determine the conditions of your card and purchase.  It is this type of dynamic purchasing that we will be doing for just about everything.  Driverless cars will be rented by the month.  Subscriptions will be based on the amount you watch, or read, or listen to.  Your computer is talking to mine.  Finance is becoming more dynamic and our currencies must change right along with it.

171202 Bitcoin’s Future

 

Screen Shot 2017-12-02 at 8.22.50 PM
http://www.bitlisten.com creates a bubble for every bitcoin transaction in real time.  The size of the bubble and the sound it makes are proportional to the trade size.

 

Once Bitcoin reaches its fighting weight, we probably won’t notice it.  Bitcoin is just another form of currency.  But the differences between life now and then will be obvious.  Exchanging money will be instantaneous.  There will no longer a need to wait for a check to clear, or stocks to be sold, or an insurance policy to be “cashed out.” Business is conducted between total strangers without a second thought.  Avoiding certain expenses simply because the banking fees are excessive would be a thing of the past.  There are no fees.  At that future time, bitcoin is just as common as dollars and cents are today.  Credit and debit cards disappear.  There’ll be no need for them. You’ll keep your bitcoin wallet on your smartphone.

In the transition from now ’til then, from bitcoin as a curiosity to bitcoin as a commodity, your other assets do not change.  Your house, which may be of average value on an average block in America, continues to be of average value.  Your stocks and bonds go up and down in value as they did before and continue into the future.  Gold and silver do what they have always done in providing safe haven and stability.  What will change is the value of bitcoin, going from zero to its ultimate value, whatever that is.  When it reaches that amount, it should become as stable as any currency can be.  We live in a dynamic world.  Shit happens.

When bitcoin started, it had no value.  The programmers, having fun with it, got the ball rolling.  Ever hear the story about the slice of pizza a programmer purchased for 10,000 bitcoin.  True enough.  From those early times, as people’s confidence grew in the concept and the currency, the value of bitcoin has continued to rise.  As it now ‘goes parabolic’ people liken the craze to a financial investment bubble, e.g. the tulip mania of the seventeenth century in the Golden Dutch Age.  Remember, the dot-com bubble of 1999?  There are similarities to that bubble and what is happening around bitcoin today.  At that time, anyone who could convince a group of investors to plunk down a few hundred grand could make themselves a website and a dot-com IPO.  Today ICOs (Initial Coin Offerings) are appearing almost daily.  Someone has an idea for a cryptocurrency and Bob’s your uncle.  The only thing is, Bitcoin is not a bubble or anything close to it.  Bitcoin represents the birth of a new asset class, cryptocurrency based on encryption techniques and money.

What is happening at the moment with bitcoin is a once in a lifetime phenomenon.  During this transition period, you can take your fiat currency and exchange it for another asset class, cryptocurrency, and ride the wave.  However, these are not tidal waters which ebb and flow.  Bitcoin is here to stay.  The only question is how pervasive it will be in our economy.  Compare it to gold. All the gold in the world weighs about 5.5 billion ounces.  There are 7.5 billion people in the world.  That works out to about 3/4 ounces gold per person.  If the gold were distributed evenly throughout the world, each person would have about $1000 in gold.  There are 21,000,000 theoretical bitcoins.  At present, 16,600,000 have been mined.  The rest will be mined in the coming 100 years as set out by the system’s designer, Satochi Nakamoto.  If Bitcoin came to represent all wealth, as we once used gold, each bitcoin would be about $452,000.

Bitcoin grew 400% from $2450, five short months ago, to $10,929 as of this writing. On the night it hit $11,500 to set a new high, it fell 20% in the next few hours. There is no doubt that the bitcoin market is volatile, no place for the faint-hearted, timid, nervous, easily scared, fearful or afraid.

bitcoin-other-world-coins

171106 Frontier Days

Screen Shot 2017-10-18 at 8.45.27 PMWhat’s happening in the world of cryptocurrencies reminds me of the time when the Internet was just becoming known and getting popular.  People were scrambling to understand the Internet, to learn what a browser was, why you would call a web address a URL and other such new phenomena.  You could register a domain name for $9.95 and they were ALL available. “They would be worth good money some day,” someone told me.  Anyone could have registered macdonalds.com, coupon.com, or ford.com if they’d had a mind to but no one could think of what one would do with them, and it wasn’t clear that they would be worth money then.

When the use of blockchain technology and cryptocurrencies spread through our society, there will be tokens or cryptocurrencies for everything.  There’s a good chance that half of all the cryptocurrencies out there already will be valuable at some time in the near future.  We’re at the beginning of virtual money, and as currencies come into being, with a little imagination, all you have to do is put out your hand and grab some.

I founded and managed a small software company for many years that specialized in barcode.  I learned a great deal about barcode during those years.  Barcodes are like languages in that if you print a certain barcode type and your scanner is capable of reading that barcode type you will be understood.  The reasons for different types of barcodes are many.  One barcode type might be capable of being printed smaller than another.  There is a barcode for really bad printers.  There is a barcode just for pharmaceuticals.  There is a barcode that can hold two thousand characters.  There is a barcode just for military purposes.  So, too, are there now cryptocurrencies with special features and applications.  The list is already enormous and keeps growing.  We already need a dictionary of cryptocurrencies to understand the universe of virtual money.

There is no doubt some will be enormously popular and some will disappear.  The world is evolving quickly.  No doubt fortunes will be made and lost during this process.