Bloomberg is outrageously reporting that the launch of JP Morgan’s new cryptocurrency is boosting bitcoin prices.
It reveals an epic lack of understanding on the part of mainstream media and the financial industry at large. And it’s a disservice to those who rely on traditional financial media for trusted information.
The story credits weak analysis from Etoro analyst Mati Greenspan:
“What some people have pointed to is that because [JP Morgan is] using distributed ledger technology and they’re calling it a cryptocurrency, that could have a positive effect on the industry.”
The Bloomberg story is just the latest in a string of many short-sighted and wildly inaccurate headlines around the JP Morgan crypto launch.
This one at Baron’s is particularly laughable: JPMorgan Just Killed the Bitcoin Dream.
But The Washington Examiner gets it wrong too with JPMorgan’s Alternative to Bitcoin.
JP Morgan’s digital coin “JPMCoin” is nothing like bitcoin. It can’t possibly be a bitcoin “killer” or “alternative” when it has a such a dramatically different function and background.
JP Morgan shocked the financial industry last week by launching JPMCoin – the first native cryptocurrency issued by a major bank.
Except it’s a cryptocurrency in name only.
Tied to the value of the dollar, JPM Coin is essentially a stable coin. The bank will use it to instantly settle payments between clients. Further, it could be used to digitize securities like stocks and bonds.
The irony of JP Morgan’s cryptocurrency launch was not lost on the crypto community. JP Morgan boss Jamie Dimon famously called bitcoin a “fraud” while building his own cryptocurrency behind the scenes.
Bloomberg’s headline tries to draw together two completely unconnected events. Bitcoin’s price surge to $4,000 and JP Morgan’s cryptocurrency launch.
The truth is JPM coin has nothing in common with bitcoin. It’s not a threat to bitcoin, nor does it have any attributes that could support bitcoin’s price.
As Bloomberg’s own chart clearly shows, the bitcoin boost came four days after JP Morgan’s announcement on the 14th February. Four days!
The analysis clearly ignores other fundamental catalysts of bitcoin’s price rise. For example, a major wealth manager for pension funds just recommended bitcoin allocation. Nasdaq is launching a bitcoin price index. Bitcoin’s lightning network is breaking new ground. And not to mention the basic technical indicators behind bitcoin’s rally.
To credit JPMCoin with bitcoin’s price rise is to completely misunderstand what JPMCoin is.
JPMCoin is nothing like bitcoin. It’s built on a private blockchain. It requires permission to use it. Its price is pegged to a fiat counterpart. It’s centralized, not decentralized. It relies on a trusted third-party.
It’s everything that bitcoin fights against. As Jerry Brito, executive director of research group Coin Center explains,
“[It’s] the same distinction between AOL and the internet. The internet is open, so anybody who wants to create a blog, website, or consumer service can connect a server to the network without asking permission from anybody. Compare that to AOL – it was a permissioned network where if you were a publisher, you had to go to the company and seek their permission.”
The launch of JP Morgan’s is a clear sign that the banking industry is threatened by the rise of bitcoin. The aging institutions are just scrambling to stay relevant with weak replicas of blockchain technology.