J.P. Morgan manages $1.772 trillion dollars as of Sep 30, 2017. Nearly all this currency is not hard cash or printed notes. It is stored in digital wallets and passed around the globe electronically and yet Jamie Dimon thinks buys of a digital currency are stupid.
Yet other major players in investment banking are doing exactly that but without doing exactly that. Rather than simply trading digital currency, wall street firms are now moving to bring a new type of digital money to market for trading via futures contracts on Bitcoin.
Bitcoin has a market cap of over $100 billion at time of writing. Any potential futures market would allow people to make bets on the future price of Bitcoin similar to other commodities markets like agriculture, oil, and precious metals.
The purpose of a futures contract is to lock in a price of a tangible good for delivery at a future date. One party is guessing that a price may go higher or lower and attempting to either sell for profit or buy at a lower price. This requires another party to take the opposite bet. The price of futures contracts then reach equilibrium when the number of buyers and sellers equalize.
Bitcoin is hardly a tangible asset according to many including Dimon who believes fiat currency backed by nations is the only legitimate currency. Others disagree. CME Group Chairman Terry Duffy expects to go live with the first Bitcoin futures market the second week of December to trade Bitcoin contracts.
This begs the question, if people like Jamie Dimon think Bitcoin is a scam, what does wall street want with futures?
Interestingly, CME Group has not decided to own individual Bitcoins but only to offer an exchange for futures. This allows CME to pocket fees for contract transactions without taking a position or bet on the underlying commodity, in this case Bitcoins. With a futures market CME can profit no matter the outcome of Bitcoin price provided the futures market stays active.
CME has been getting involved with Bitcoin for over a year by first publishing the Bitcoin Reference Rate (BRR) and Bitcoin Real Time Index (BRTI). Despite Bitcoin buys being “stupid” according to Dimon, Terry Duff has added the BRR and BRTI to the CME homepage at www.CMEgroup.com at the bottom. The same page has details including interest rates, equity, agriculture, and precious metals markets.
Digging deeper it appears CME has other interests in the cryptoworld. Yesterday CME group announced via Coindesk that CME futures are coming soon. In small italic print at the bottom is this disclaimer, “CME Group is an investor in Digital Currency Group, CoinDesk’s parent company.”
The cryptoworld is famous for pump and dump of small currencies for short term profit. CME appears to either believe in Bitcoin in the long term or is pumping this new method to trade to gain a short-term profit. CME believes
enough to create a complicated market system to bet on future prices of crypto in order to collect fees, invest in crypto companies that spread news, but not yet take a position with actual Bitcoin.
Anyone who follows USA Network Mr. Robot knows the story. E-Corp, the large conglomerate, is brought down near bankruptcy only to hatch a plan to create a cryptocurrency to replacing fading confidence in the dollar. Jamie Dimon at the end of his video linked above says something very telling.
“Governments, and this is not a technological statement, are going to crush it one day. Governments like to know where the money is, who has it, and what you are doing with it. In case you haven’t noticed. And governments like to control their currency. . . and there is a central bank, now of course they can misuse it and inflate it so there is a case for Bitcoin.”
Scary to think the CEO of E-Corp (JP Morgan Chase) admits in one statement that governments will crush it because they want to control money but at the same time central banks can abuse money. In the end those who pay for this abuse are the very people who will stand to benefit the most from cryptocurrency.