How to Tell Jamie Dimon He’s Wrong

A Rebuttal of Common Arguments Against Bitcoin

Note: I am not a financial advisor and this is not to be considered financial advice, it is merely my opinion and any investment should not be be taken without speaking to a qualified professional first.

This is also not a shot at Jamie Dimon at all, he has just found himself as the face of the “bitcoin is a fraud movement.” This article simply outlines legitimate arguments against common things people (like Jamie Dimon) have said about bitcoin.

Bitcoin has no intrinsic value, it isn’t backed by anything!

I always laugh when people tell me bitcoin has no intrinsic value… as if any fiat money does. We’re not on the gold standard anymore, you can’t redeem any government issued money for anything. The only thing backing the USD is the “full faith and credit of the US Government,” but what does that even mean? We trust a government with $20 trillion in debt that reserves the right to print trillions out of thin air anytime the economy needs stimulus.

And this is only from the perspective of a United States citizen. This can be hard to step out of for many even though U.S. citizens represent less than 5% of the population. But bear with me here and try to think about the other 95% of the world:

Think about the millions of Venezuelans who have their life savings in bolivar that is inflating ~4000% annually.Their earning power is decreasing dramatically due to this hyperinflation. Their unstable, corrupt government prevents them from retaining the value they have worked hard to attain.

Now think about those in Greece who had all their money in banks that were shut down resulting in withdrawal limits of a whopping €60 per day! The money people believed was “theirs,” was actually not, and they had to face this the hard way when they almost lost complete access to their funds.

So now I ask, where is the intrinsic value in fiat money for these people and those in similar situations across the world?

When people tell you there is no intrinsic value, remind them of this:

No other monetary system in the world allows you to truly be in control of your money without any authority being able to place restrictions on where or how much of it you can spend. No other monetary system has a stable rate of inflation, free from the whims of central bankers.

Bitcoin is a bubble, it’s bound to pop!

Nobel Prize winner Rober Shiller defines a bubble as “a social epidemic that involves extravagant expectations for the future.” This is always an interesting one because part of me wants to agree. I think of a financial bubble as the inflating price of an asset characterized by investor’s seeing an initial price rise and hype surrounding an asset followed by emotionally buying out of FOMO further driving the price up. This leads to a deviation from what the price would have been with the traditional market fundamentals prior to the FOMO.

So, when people say bitcoin is a bubble there are times I want to say it is. When bitcoin was hovering around $20,000, it was fair to say it was in a short-term bubble. Prior to the price doubling in December, bitcoin and the crypto asset class as a whole started getting noticeably more attention. CNBC went from zero coverage of bitcoin to frequently bringing on “experts” to discuss the crypto craze (or carnage depending on the 24 hour price movement). People would see all this hype surrounding the price and get FOMO so they would go to the first place they heard to get bitcoin– Coinbase, which was adding a remarkable 100,000 users on some days.

To me, yes that is a “bubble” because of the dynamics of why the price is rising making it unsustainable. But is that an argument against the true value of bitcoin? Absolutely not. Bitcoin was in a clear bubble in 2013 when similar things were happening as it got more and more hype until the price peaked at around $1,100 and then subsequently lost 80% of its value. Poor sucker who bought in at the peak of the “bubble,” he’s only up 1000% from that time.

Amazon Stock Price

But seriously bubbles are a very natural part of the progression of new technologies. Take a look at the price of Amazon stock’s during the dot com bubble. Clearly they had a strong business model and people believed in Jeff Bezos, but the hype around tech at the time drove the price up higher than justified by current fundamentals. When it inevitably popped, prices were driven lower than were justified by current fundamentals. Regardless, if Amazon was a company you believed in you would be doing very well, even if you bought in at the peak of the tech bubble.

So when I talk to people who say bitcoin is a bubble, I tell them it could drop 50% or it could double in the next month, its really too hard to say and to try and time when to put money in or when to take it out. That’s why I only ever advise people to buy bitcoin if they believe in the long-term potential of the technology and what it stands for because then they can look past these short term price fluctuations and inevitably realize massive gains.

Recently Noam Levenson put out a great article providing insight on this bubble phenomenon.

Bitcoin is nothing more than tulip mania!

I’m sure you’ve heard this comparison to the Dutch tulip bubble in the 1630’s where there was a frenzied craze surrounding tulips. The futures trade allowed for a more liquid market and according to historians, resulted in one tulip bulb being worth “enough to feed, clothe and house a whole Dutch family for half a lifetime”

More wise words from Naval Ravikant

Tulip mania was pure speculation as the tulip contracts had no value. As mentioned earlier, bitcoin truly has utility and while speculation does play a large role in the price, its people speculating on how much the utility will increase in the future, which many people (like Steve Wozniak) believe could be enormous since bitcoin can act as an effective store of value.

As Chris Burniske states:

However, remember that just because the unfettered enthusiasm of a crowd takes an asset to unreasonable highs doesn’t mean the asset itself is flawed. Tulips are still enjoyed and sold worldwide. And as we saw with the tech and telecom boom, there were gems such as Amazon and Salesforce that would reward their patient investors spectacularly for years to come. The investors who got burned were the ones who bought because everyone else was buying, and then sold because everyone else was selling

Bitcoin is a Ponzi Scheme!

This one is really easy to refute. A Ponzi scheme is a fraudulent scam where investors are paid out with money from later investors. With bitcoin, you never get paid anything. Sure you could argue that money from later investors is what is driving up the price, making early investors money… but that’s just called capital appreciation. If any financial asset is rising in price its because people are willing to pay more than previous investors. The only difference is instead of being “backed” by a company, bitcoin is backed by the properties that make it so unique and provide real value for its users.

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