TRENDING: Is the smart money becoming fool’s gold?
When Chinese regulators and Wall Street bankers agree on something, it’s worth taking notice. Bitcoin investors beware
It was perhaps inevitable that global financial regulators would step in to try to contain cryptocurrencies — bitcoin being the leading example — in their systems, or to expel it altogether.
While they have been bemused by the volatile trading in the currencies, they have become alarmed at the proliferation of a species of financial arrangement called the ICO, or "initial coin offering". Playing on the acronym IPO, but sharing none of the regulatory controls or fiduciary requirements applicable to initial public offerings, ICOs offer punters the opportunity to invest in new ventures that deploy blockchain, the technology behind cryptocurrencies.
Blockchain is computer code that makes it impossible to alter a transaction’s history fraudulently because it is verified on a vast network of independent computers across the globe.
ICOs appear to have got out of hand — the attempt to issue a currency called Coinye West being a case in point.
China has been the first to act, banning ICOs altogether and causing its cryptocurrency trading market to fall in a heap.
Since so much was staked on the vast Chinese appetite for crypto — a way around the country’s notoriously tight forex controls — the global market was severely affected and bitcoin plunged from a high of more than US$4,600 in late August to well below $4,000 in the week of the Chinese move, where it continues to trade.
Enter Jamie Dimon, CEO of a little bank called JPMorgan Chase. Bitcoin is a "fraud", he says, adding that it is worse than the historic tulip bulbs asset bubble. It "won’t end well", he says.
Dimon’s words appear to have further affected the market. After all, it’s not every day that you find something that Chinese regulators and Wall Street bankers agree on.
So, is a bubble popping or is there more money to be made on speculating on bitcoin and its cousins?
Meanwhile, it has emerged that, Dimon notwithstanding, JPMorgan Chase has been acting as an agent for buyers and sellers of bitcoin XBT — which tracks cryptocurrencies.
Did someone say "buying opportunity"?