The price of bitcoin rose 8.6% from the end of last week to yesterday, February 18, on news that JPMorgan Chase & Co. (NYSE:JPM) was launching the first-ever major bank-backed cryptocurrency, JPM Coins.
Apparently, after Jamie Dimon, JPMorgan Chase’s chairman and CEO, called bitcoin a “fraud,” saying in October 2017, “If you’re stupid enough to buy it, you’ll pay the price for it one day,” the big bank honcho has had second thoughts.
Something changed for Dimon and JPMorgan Chase, and today I’ll tell you what a bank coming to market with its own coin means for bitcoin and other cryptocurrencies – and it isn’t what you think.
Regret and Reversal
Back in January 2018, Jamie Dimon said he regrets calling bitcoin a fraud.
Now we know why.
That doesn’t mean Dimon is advocating bitcoin or any other cryptocurrency. In fact, America’s biggest bank doesn’t let its customers buy bitcoin with their bank-issued credit cards.
Bitcoin and other cryptocurrencies are considered their own asset class and as “assets,” their value can fluctuate – sometimes wildly.
Back in November 2015, bitcoin traded around $357. By November 2016, it was trading at $750, a 110% increase.
In November 2017, the value of a bitcoin had soared to $8,795, a 1,072% increase in a year.
Then, just a month later, the cryptocurrency star jumped another 123% to reach $19,650.
Unfortunately for late-to-the-game bitcoin buyers, by November 2018, the fallen angel was trading at $3,774, down a whopping $15,876 dollars, or 80%.
Maybe Jamie Dimon was right when he said, “If you’re stupid enough to buy it, you’ll pay the price for it one day.”
Not Your Average Cryptocurrency
JPM Coins aren’t going to be anything like bitcoin or any existing cryptocurrency.
While some may consider them an asset class all their own, in reality, they won’t be.
That’s because JPM Coins are pegged to the U.S. dollar.
They won’t be subject to (at least technically the bank doesn’t expect their coins will be subject to) speculative valuation.
In other words, they’re not designed to be “tradable” as a standalone cryptocurrency.
They’re designed specifically to mirror the exact value of a dollar. If the dollar goes up against the Japanese yen, then the value of a JPM Coin will go up by the same amount against yen.
The first real-world use of a digital coin issued by a bank will be used strictly, initially at least, for “payments.”
JPMorgan Chase handles more than $6 trillion in global payments every single day.
It’s not a retail payments business, it’s wholesale payments.
The bank facilitates payments domestically and around the globe for its corporate clients, transferring money to meet settlement of transactions day in and day out.
Those payments take time.
Money transferred across old technology apparatuses like wire systems and the SWIFT system (Society for the Worldwide Interbank Financial Telecommunications), a co-operative global communications link for data processing and a common language for international financial transactions, can take a day or several days.
JPMorgan is planning to use their coins as a means of payment, which they say will be virtually instantaneous, as in real-time.
Clients will be issued coins in the exact amount of dollars they have on deposit at JPM.
Instead of sending money across wires, the bank will electronically issue payment in coins tied to the bank’s blockchain, which will arrive instantaneously anywhere across the globe, so payments can be real-time.
It’s really that simple.
Of course, beyond “payments” the bank expects its coins will be used elsewhere as they’re accepted.
Their plan is to incorporate JPM Coins in securities transactions and eventually for them to replace dollars held abroad by U.S. corporate subsidiaries.
The bad news is JPMorgan Chase’s coins are nothing like bitcoin and don’t confer any legitimacy on bitcoin or any other existing cryptocurrency.
So, the almost 10% jump in bitcoin from the end of last week, when word got out about JPM Coins coming to market, is just another blip in value for the original blockchain cryptocurrency.
At the end of the day, bitcoin or any other cryptocurrency, if it’s not exactly pegged to the U.S. dollar, it’s going to fluctuate, just like any other “asset,” if you want to call it that.
As I’ve said before here, there’s so much written about bitcoin, from so many angles, it’s hard to know what it really is.
What is it good for? What is it worth? Where is it going?
It’s obvious there are huge moneymaking opportunities in Bitcoin. The cryptocurrency’s unprecedented development has already minted a few billionaires and many millionaires in its short life.
You can be sure, however, those winners didn’t get to where they are without knowing bitcoin basics.
If you want a shot at bitcoin riches, you have to know the truth about this cryptocurrency, so you can make this moment in history a profitable one.
That’s why we have an in-house bitcoin authority here at Money Morning – and he’s here as your guide to navigate all things cryptocurrency.
In an exclusive interview, our Executive Editor picks this expert’s brain, and you won’t want to miss out on what he has to say.
Click here to learn more.