The Breakdown - JPMorgan's Bitcoin Journey: From 'Worse Than Tulips' to 'Not My Cup of Tea' to New Product

Starting point is 00:00:00 I've jokingly said that these types of announcements from big new institutional players getting into Bitcoin for the first time are getting more and more useless as a daily podcaster because they just don't excite people anymore. We're all so ready for it. We're also used to it. But even the curmudgeonliest and cold-heartedest have to appreciate the significance of the turnaround of J.P. Morgan. Welcome back to The Breakdown with me, NLW. It's a daily podcast on MacKee. Bitcoin and the big picture power shifts remaking our world. The breakdown is sponsored by nexo.io and neared.org and produced and distributed by CoinDes. What's going on, guys? It is Monday, April 26th, and today we are talking about J.P. Morgan's

Starting point is 00:00:48 Bitcoin journey, from worse than tulips to not my cup of tea, to a new client product. First up, however, let's do the brief. First on the brief today, sports and crypto are definitely coming together in this cycle. A couple of years ago, NFL offensive tackle Russell Lacoon made a now famous declaration, Pay Me in Bitcoin. He currently takes half of his $13 million salary in BTC and half in Fiat. Kansas City Chief's tight end, Sean Culkin, is taking it to the next level, and we'll be converting the entirety of his 2021-based salary, $920,000 into BTC.

Starting point is 00:01:25 Colkin is going to convert his fiat to Bitcoin's salary conversion service. This is the same service that Russell uses, and it means that the paychecks are automatically converted, which detaches them from market movements and allows Culkin, in his own words, to stay focused on the game. For their part, the Kansas City Chiefs are aware, but their contract is still denominated in U.S. dollars. About the deal, Culkin said, quote, for me, it makes sense to get paid in the hardest form of currency, and it's something that's resistant to inflationary pressures that I think is very relevant in this current economic environment. That wasn't the only NFL crypto news today as the presumptive number one draft pick from later this week, Trevor Lawrence, announced

Starting point is 00:02:06 a sponsorship deal with Blockfolio, the bonus of which will be paid entirely in crypto. Clearly, there is some mainstreaming momentum going on. All right, next up on the brief, WTF is going on in Turkey. I've been keeping you posted on everything happening in Turkey, but it's just gotten crazier. On April 16th, the central bank announced that crypto would be banned as a means of payment effective April 30th. Two days later, Turkish exchange Thodex went offline on April 18th. The CEO of that company has gone missing and there are claims of massive fraud. 62 people with ties to the platform have been detained. Now, four people have been detained as part of an investigation into Verbit coin, which is another Turkish exchange, but none of this has stopped Turkish crypto usage.

Starting point is 00:02:49 In fact, it's gone up sharply. Perhaps this is why a central bank governor went on state-run TV in Turkey to clarify saying, quote, you cannot fix anything by banning crypto, and we do not intend to do this. Basically, he was saying that there are coming regulations designed to address the, quote, alarming amount of funds leaving the country via cryptocurrency. Third and finally on the brief today, a new Wyoming Dow law. Dow stands for decentralized autonomous organizations, and to listen to their boosters, DOWs represent a fundamentally new way of organizing and coordinating human resources and efforts. Detractors say, among other things, that they won't have any real legal standing.

Starting point is 00:03:30 They'll effectively be a glorified Facebook group. Well, interestingly, Wyoming has passed legislation that creates a legal link between Dows and the state government, allowing Dows to be registered as LLCs starting in July. Wyoming Senator Chris Rothfuss said about it, Digital asset stakeholders made it clear to us they were concerned about facing general partnership liability in the absence of a well-defined corporate structure. Our Dow LLC legislation should dispel that concern. Now, I think this is going to be a bigger subject of conversation going forward, for the simple reason that Daos, some version of them at least, are such a next logical human

Starting point is 00:04:06 organization step after anonymous accounts. There's no way as more activity shifts online into communities with pseudonymous actors that these don't just become more of a thing. However, the legal concerns are real and this sort of articulated legal space could open up some new possibilities. Looking for the best way to unlock your crypto's liquidity? Nexo.io is exactly what you need. Borrow against your digital assets at just 5.9% APR. Earned passive income with yields of up to 12% and swap between more than 75 market pairs with the instant Nexo exchange. Try the Nexo wallet app to get the whole 360 degrees of crypto banking. Get started at nexo.io. Did you know nearly $338 million worth of NFTs were sent last year?

Starting point is 00:05:00 And in 2021, that number's growing faster than ever. Looking to make your first NFT? Check out NEAR's fast, scalable, low-cost, open-source platform. Learn why NEAR is the infrastructure for innovation at NEAR.org. That's N-E-A-R-O-R-G to learn more today. With that, let's move to our main discussion. The vindication is running hot on Bitcoin Twitter today, and rightly so. First of all, Bitcoin last week was looking clearly oversold.

Starting point is 00:05:35 The price of Bitcoin is back currently just above 54,000. Remember, it dipped all the way back down to 47,000 last week. On this show and in many other content domains, people pointed out the nonlinear nature of bull markets, and here we are. Once more for the people in the back, the 2017 bull market retraced between 20% and 40%, 6%. or seven times on its March up. This was a 9.7% jump, the biggest percentage rise since March 1st. But no, no, no, that's not the real reason there is an eventually they'll all come around mood on Twitter. J.P. Morgan Chase is rolling out a Bitcoin fund. We'll get into the details in just a

Starting point is 00:06:14 moment, but first, let's give some of the past highlights. In January of 2014, then Treasury Secretary Jack Liu said that he had spoken to J.P. Morgan Chase CEO, Jamie Diamond, about Bitcoin, and the two shared a certain incredulity about it. In that month, Diamond called it a terrible store of value because it could be replicated over and over. In November of 2015, Diamond got way out ahead of the government banning Fudd, saying, quote, no government will ever support a virtual currency that goes around borders and doesn't have the same controls as fiat currency. His most famous negative comments, however, came at the delivering alpha conference on September 12, 2017, where he called Bitcoin a fraud, said it will eventually be closed, and said it's worse than tulip bulbs. It won't end

Starting point is 00:06:57 well. Someone is going to get killed. Now, holding aside it being very unclear what he means by that, he also said that he'd fire any J.P. Morgan trader caught trading Bitcoin in a second. I'd fire them in a second, he told the conference for two reasons. It's against our rules and they're stupid, and both are dangerous. Pretty significant words from a major bank CEO. But then fast forward to November, of last year, and his tone has started to soften. He said things like, quote, the blockchain itself will be critical to letting people move money around the world. We will always support blockchain technology. Remember, at this point, they had already released the JPM coin settlement stable coin. So clearly there was a reason for him to have that softened

Starting point is 00:07:40 stance. And while he was lauding blockchain, he also softened his tone on Bitcoin itself, saying simply that it, quote, wasn't his cup of tea, while also acknowledging that, quote, very smart people were buying into it under the belief that it would outperform other hedges like gold. Now let's fast forward again to this morning. J.P. Morgan Chase is preparing to offer an actively managed Bitcoin fund. This is all reported from insider sources and is not yet confirmed by J.P. Morgan, but here's what we know so far. The fund will be actively managed, which is different than many of the other private wealth-focused funds out there. The fund will roll out as soon as this summer. Nidig is serving as the custodian for the fund.

Starting point is 00:08:20 that as another one in their cap, as they're also offering a Bitcoin fund to JPM Archrival, Morgan Stanley. As you would expect, this is aimed strictly at private wealth clients, so sorry, guys, no Bitcoin for you plebs out there. Now, this isn't totally surprising, right? In February, a number of leaders from JPM's corporate and investment banking division more or less acknowledged that customer demand might one day force their hand. Co-president Daniel Pinto said, quote, If over time an asset class develops that is going to be used by different asset managers and investors, we will have to be involved. The demand isn't there yet, but I'm sure it will be at some

Starting point is 00:08:54 point. Apparently, demand is now there, and for those keeping track at home, it clearly was then, too. Pinto was setting up narrative space for himself and the company rather than having a hard pivot all at once. JPM also issued a crypto-adjacent investment product in March, which was a structured note tied to the performance of Bitcoin proxy stocks, such as micro-strategy and riot blockchain. This is obviously a much bigger deal. However, it wasn't the only big bank deal announced today either. Institutional crypto infrastructure firm Securrency has closed a $30 million round. One of the investors in that round is U.S. Bank, another top five bank in America, as well as State Street. U.S. bank exec, Hoshni Shadid, said, our investment in security is both a testament to

Starting point is 00:09:39 securities promising technology as well as to the importance of tokenization as a future core technology in the investment servicing industry. Now, about U.S. Bank, security, currency CSO Patrick Campo said, quote, if you were talking about connecting crypto to the real world, you can't get more Midwest mainstream than U.S. Bank. They are massive, yet don't make a lot of noise in this space, but they've got a very clever team and they're very serious. I think they are the proverbial one to watch. I can validate the Midwest mainstreamness of U.S. Bank. They were the bank on Northwestern's campus when I showed up as a freshman and I ended up banking with them for like 15 years. Now, I've jokingly said that these types of announcements from big new institutional players

Starting point is 00:10:21 getting into Bitcoin for the first time are getting more and more useless as a daily podcaster because they just don't excite people anymore. We're all so ready for it. We're also used to it. But even the curmudgeonliest and cold-heartedest have to appreciate the significance of the turnaround of J.P. Morgan. It was one of the most notable holdouts in a sea of big financial firms who have been getting on board the Bitcoin train, and now it's joining the party as well. Keep in mind, this is the biggest bank in the U.S. with more than $3 trillion in total assets. The next biggest bank is Bank of America with $2.26 trillion in assets, and the next after that is Wells Fargo with $1.77 trillion.

Starting point is 00:11:00 There's this great dialogue from the West Wing, Season 1, Episode 6. CJ, the press secretary, and Sam, the Deputy Communications Director, are discussing the upcoming census. Specifically, CJ is helping Sam to help explain the census bill to her. her. She says, I don't understand certain nuances. And he says, like what? She says, like the census. Sam looks at her agog and says, listen, we've been working on this for weeks and I've heard you talk about it. To which CJ replies, I've been faking it. Sam then says a line that I think about so, so frequently, anytime one of these big institutions finally comes around to Bitcoin. He says,

Starting point is 00:11:38 okay, tell you what, let's forget the fact that you're coming a little late to the party, and embrace the fact that you showed up at all. Welcome to the party, J.P. Morgan, and until tomorrow, guys, be safe and take care of each other. Peace. We're witnessing the greatest paradigm shift in finance in modern history. Join thousands of newsmakers and influencers talking the future of money at Consensus by CoinDesk,

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The Breakdown - JPMorgan's Bitcoin Journey: From 'Worse Than Tulips' to 'Not My Cup of Tea' to New Product

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