Earlier this month JP Morgan CEO Dimon called bitcoin a “fraud”. This is timed after China government’s announcement on ICO ban. This series of negative news sent bitcoin prices falling

Dimon has struck again on cryptocurrencies with new statements:

It’s creating something out of nothing that to me is worth nothing The bigger they get, the more governments are going to close them down Creating money out of thin air without government backing is very different from money with government backing

Our views:

A) Governments will come out with their own digital currencies. This is already evident as we note that governments including the chinese and singapore government are already developing their own digital currencies. These digital currencies will be issued and may one day replace fiat as payment currencies. This is especially so whereby walletless payment through mobiles are already prevalent.

B) Bitcoin, ethereum are here to stay and will co-exist in the future with governmental digital currencies. This is just like the Bretton wood system whereby USD is pegged with gold but as US government want to print more money the system was eventually abolished in 1971. However gold still exist today as a store of value and the price has increased from USD42 in 1971 to USD1300 (current prices). Bitcoin is already being recognized as Digital Gold and here to stay for following reasons:

Store of value and has limited supply, this is unlike government issued cypto which allow govt to issue more digital currencies in thin air.

In countries whereby monetary policy failed and there’s hyper inflation: owning bitcoin rather than holding fiat is a preservation of wealth

Governments would not be unanimous in their stand on digital currencies. Although China has closed exchanges and looking to issued their own digital currencies. Japan has legalize bitcoin as a payment currency and there are apps like bitpay facilitating these payments

C) Expect consolidation in the digital currency markets as increased regulatory actions from government may mean:

Higher KYC standards to restrict capital outflow and money laundering activities,

Digital currency exchanges would be more heavily regulated and trading of less reputable tokens would be prohibited,

More restrictions on new ICO token issuance which may crowd out traditional corporate financing (bank financing and IPO issuance).

These measures may not be welcoming in the short term but it is actually healthy for the digital currencies market; as it ensure only the useful and dominant digital currencies should exist.

Trading Recommendation: Buy and hold

Be a believer and not a speculator. Now is a good buying opportunity to buy and hold on to the dominant digital currencies (Especially Bitcoin) if you are a believer.

Not forgetting Morgan Stanley, Chase Bank and JP Morgan securities buy bitcoin after Jamie Dimon announcement and sent the price soaring from USD3k to USD3.6k within a couple of days. These banks have a vested interest in seeing Bitcoin fail, so they can join the upswing in potential profits when prices recover. Do not fall for the same trick twice.

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