The Quiet Game Financial Institutions Have Been Playing with Bitcoin

Oh… the irony.

Years ago back in 2017, JP Morgan Chase CEO Jamie Dimon famously stated that bitcoin “is a fraud.”

He went further to say this:

“The currency isn’t going to work. You can’t have a business where people can invest a currency out of thin air and think that people who are buying it are really smart.”

One of his most dramatic comments was:

“It’s worse than tulip bulbs. It won’t end well. Someone is going to get killed.”

And one of my very favorites came when he was referring to his own JP Morgan traders trading bitcoin:

“I would fire them in a second, for two reasons: It is against our rules and they are stupid, and both are dangerous.”

These comments were made around September of 2017, when one bitcoin was trading for less than $4,000.

I think we all know what has happened since then…

Actions Louder Than Words

Bitcoin has risen more than 1,000% since 2017.

Must have been humbling for Dimon.

Did he recant? Has he since revised his position on the matter?

After all, bitcoin as a digital asset now has a market capitalization of $922 billion, and it has been over $1 trillion in the past.

There must be something to it, right?

And yet, last January (2023), when Dimon was in Davos attending the World Economic Forum where unelected “officials” (elites) meet to decide how the rest of us can and cannot live, he dug his hole deeper with the following:

“Bitcoin itself is a hyped-up fraud, it’s a pet rock.”

I can’t help but chuckle at the comparison to a pet rock, which I’m absolutely certain has no monetary value.

Whereas a bitcoin is now worth $47,258.

But the irony, the real irony, is not in listening to what the JP Morgan CEO says, but what his company is doing…

In anticipation of the Securities Exchange Commission (SEC) approval of spot bitcoin ETFs this week — which finally happened yesterday after years of delay — I was curious who the financial institutions were behind the ETFs.

For reference, here are the 11 spot bitcoin ETFs that were approved… and the institutions behind them:

For those interested in the nitty gritty of how each ETF has been constructed, we can find that information on the SEC’s website in the ETF’s S-1 filing.

All of the ETFs have them, and they have all been amended, so we just need to look for the latest S-1/A filing.

For example, here is the latest S-1/A filing for the BlackRock iShares Bitcoin Trust.

Now, where it gets interesting is when we look at the list of Authorized Participants in the ETF. 

We can consider these as large financial institutions that are authorized to purchase shares in the ETF in the primary market, directly from the issuer.

Authorized Participants (APs) play a critical role as they can both hold/trade those shares and sell them to investors (i.e. us) in the secondary market.

APs are the ones that provide the liquidity that enables normal investors to trade in the bitcoin ETF. And they make a lot of money doing so.

So does it really come as a surprise to discover that of the four APs named by BlackRock, JP Morgan is one of them?

Time is Money

So much for Dimon’s threat to fire any of his traders who trade in bitcoin.

Not only are Dimon’s traders going to trade in bitcoin, they are incentivized to profit from it.

It reminds me of the old adage: “How do you know when a politician is lying? When their lips are moving.”

JP Morgan is also an Authorized Participant in the Fidelity Bitcoin Fund.

It’s not surprising that incumbent financial institutions like Blackrock and Fidelity chose to partner with JP Morgan. It would be logical to assume that the team at JP Morgan also tried to “win” the Authorized Participant role at some of the other bitcoin ETFs, as well.

After all, in for a penny, in for a pound.

But how is this all possible?

After all, Dimon is known for having such tight control of JP Morgan. He’s also one of the longest running CEOs on Wall Street, having taken on the job back in 2005.

He was even a previous director of the Federal Reserve Bank of New York.

The answer: money.

And lots of it.

Bitcoin is an asset class in itself with a market cap of almost $1 trillion. And any time there are large volumes of trading and transactions, that’s where investment banks want to be.

It doesn’t matter whether its stocks, bonds, gold, or carbon credits... 

If the volume is large enough, there is money to be made.

For years I have been writing that Dimon — and much of the traditional finance industry — have been intentionally slandering bitcoin and other digital assets.

They’ve also been working behind the scenes to slow down the pace of regulatory support for cryptocurrencies and other digital assets.

This is a normal competitive response… especially when you’ve been caught flat-footed by technological innovation.

The reality is that JP Morgan, Goldman Sachs, Fidelity, and so many others needed to buy time.

They needed to catch up on blockchain technology, digital assets, and what the new technology means for the future of finance.

It hasn’t been easy, either.

The hardest part for these legacy institutions trying to regain an edge has been hiring.

After all, the best and brightest software engineers, founders, and builders in the blockchain industry don’t want to work for a legacy institution, where they are mired in bureaucracy.

They want to move fast, iterate quickly, and make a ton of money if they develop something incredible that achieves large market adoption.

Which is exactly what they’ve been doing, as the old legacy establishments have grappled with how to play catchup.

I first recommended bitcoin as an analyst back in 2015, when it was trading around $240. Many thought I was crazy at the time.

It has now risen almost 200X since that recommendation — nearly a 20,000% increase in value.

I remember having breakfast in the summer that year with Bill Bonner, a legend in the world of financial newsletters and a fantastic writer. I tried my best to explain why there was value in bitcoin, and why blockchain technology would succeed.

He didn’t buy it. Literally.

But I took note of his objections. They were useful to me in developing a way to better explain the value of an asset like bitcoin…

A value that the legacy establishment has sensed — surely, for years — but has struggled to control.

The New Gold Standard

The reality is that not all digital assets are created alike.

It’s true that some are minted out of thin air. That doesn’t mean that they don’t have utility, though, or that the underlying blockchain doesn’t serve a useful purpose.

It just means that they were created with only a punch of a button on a keyboard. Exactly like what the U.S. Federal Reserve does to create U.S. dollars.

To create a bitcoin, massive amounts of computational power are required.

Investment has to be made in both computing systems and in the electricity to run these systems in order to solve complex mathematical problems to “mine” bitcoin.

The easiest way to think of these computing systems is that they are the network infrastructure upon which the bitcoin blockchain runs.

And the bitcoin blockchain “pays” the network infrastructure service providers in bitcoin for keeping the bitcoin blockchain running. That’s the economic incentive for providing those resources.

In many ways, it’s no different than a corporation paying Amazon Web Services for running its software and storing its data.

The major difference is that rather than the transaction being between two corporations, the bitcoin blockchain is a decentralized network, where any and all participants are welcome to contribute to the network infrastructure… and get paid for it.

And when we think about money, and how it’s made, bitcoin really stands out.

It’s programmable money. Every bitcoin, by definition, can be tracked and traced, as every bitcoin transaction is written to the bitcoin blockchain for all to see. And that transaction is recorded until the end of time.

Better yet, the bitcoin blockchain has its monetary policy literally written into its code.

There is a limited number of bitcoin that will ever be mined. And the industry knows roughly how many new bitcoin will be mined each year.

Bitcoin is the antithesis of government monetary policy.

It is open, transparent, and never deviates for political purposes, corruption, or graft.

A good friend of mine reminded me of a favorite quote of mine on this subject:

“Inflation is not caused by the actions of private citizens, but by the government: by an artificial expansion of the money supply required to support deficit spending. No private embezzlers or bank robbers in history have ever plundered people’s savings on a scale comparable to the plunder perpetrated by the fiscal policies of statist governments.”

— Ayn Rand, The Ayn Rand Letter, III, 12, I

It’s incredible that Ayn Rand wrote this back in the ‘70s.

And even before that, in 1962, she wrote the following:

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold.”

— Ayn Rand, The Objectivist Newsletter, May 1962, 18

Bitcoin is the new gold. It is a store of value.

And as hard as they tried to slow it down, many have come to see it as place of refuge from the absurdly irresponsible, trillion-dollar-plus annual deficits that the current U.S. government seems perfectly fine running.

“They” believe that debts don’t matter, and “they” can just print more.

When we understand that an asset like bitcoin has — by far — more sound monetary policy than the U.S. dollar…

It’s no surprise why it took years for the digital asset industry to gain approvals for spot bitcoin ETFs.

But no matter. The day has arrived. And spot ETFs give bitcoin legitimacy.

“Let Us Flood the Cities with Light”

The industry has literally wore down the SEC…

And while it’s true that the delays gave the legacy financial institutions time to catch up — and at least play a part in the process…

The floodgates have opened now.

With spot ETFs, financial advisors can easily recommend allocations in bitcoin to their clients. 

Through an ETF, bitcoin can now be bought, starting today, in the same way that a stock can be bought or sold.

Other funds, like mutual funds, are revising their filings to allow the holding of spot bitcoin, now that the ETFs have been approved.

Not only will this increase the buying in bitcoin, the doors are now open for Ethereum (ETH) to follow quickly with its own ETFs.

And while it’s true that Jamie Dimon and his legions at JP Morgan will now surely enrich themselves…

Many politicians, policymakers, economists, and central banks are squirming in their chairs today. 

This is painful for them to watch.

And not only is it an indictment of the fiscal irresponsibility of central banks and politicians around the world, it is a clear and present danger to their control over their fiat currencies that they so happily abuse.

Even more ironically, as Jamie Dimon said… “It won’t end well.”

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