Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Will the JPMorgan Chase Cryptocurrency have any Value?

The online rumor mill claims a JPMorgan Chase cryptocurrency is almost here. For instance, Coindesk claims Chase will start testing a JPM Coin with its clients soon.

JPM Coin could be huge because JPMorgan Chase (NYSE: JPM) is America’s bank with $2.737 trillion in total assets on 31 March 2019. Moreover, Chase reportedly moves over $6 trillion in assets every day.

Apparently, Chase will test JPM Coin by moving a percentage of its international exchange business with the altcoin. Coindesk speculates Chase built JPM Coin with Quorom its in-house version of Ethereum.

Is JPM Morgan Chase planning to enter the Remittance Market?

In addition, Chase blockchain lead Umar Farooq wants to use JPM Coin for mobile payments, Coindesk claims. Consequently, Chase could enter remittances through JPM Coin.

To explain, remittances are international money transfers between private individuals. Currently, remittances are big business, the World Bank estimates people sent $689 billion in remittances in 2018 up from $633 billion in 2017.

Moreover, Banco Santander (NYSE: SAN) is demonstrating that you can send remittances to mobile wallets and ATMs via Ripple (XRP). Santander is testing cross-border Ripple payments in Europe.

I think Chase wants to create a cryptocurrency that users could cash out through one of its many automatic teller machines (ATMs). Impressively, users can now get cash and even make pay credit card payments at Chase ATMs. Moreover, an obvious use of JPM Coin will be to send money to ATMs in other countries or get cash from foreign ATMs.

Will JPMorgan Chase Dominate Cryptocurrency?

Impressively, JPMorgan Chase has the resources to dominate cryptocurrency.

Notably Chase reported quarterly revenues of $29.123 billion and a gross profit of $29.123 billion on 31 March 2019. Additionally, Chase had an operating income of $12.728 billion and a net income of $8.753 billion on the same day.

More importantly, Chase moves a lot of money through its ecosystem. For instance, Chase reported an operating cash flow of -$80.88 billion, an investing cash flow of $36.301 billion, a financing cash flow of $69.435 billion, and a free cash flow of -$80.88 billion on 31 March 2019.

Consequently, JPMogran Chase had $302.604 billion in cash and equivalents and $299.215 billion in short-term assets on 31 March 2019. Thus, JPMorgan Chase has the resources to create and offer one of the world’s most valuable cryptocurrencies.

What is JPMorgan Chase?

JPMorgan Chase is one of America’s oldest banks one of its over 1,200 predecessor firms; the Manhattan Company, dates to 1799.

They even named JP Coin after J. Pierpont Morgan Jr; or J.P. Morgan, the legendary investment banker who dominated Wall Street in the late 19th and early 20th centuries. J.P. Morgan & Company, a Chase successor carries Morgan’s name. Morgan’s father founded that company.

They created JPMorgan Chase by merging J.P. Morgan & Company with Chase Manhattan in 2000. Bankers created Chase Manhattan in 1955 by merging the Bank of the Manhattan Company with Chase National Bank.

Chase has a long history of introducing new financial technologies. For instance, it introduced one of the earliest retail credit cards in 1958. Furthermore, Chemical Bank; another Chase predecessor, tested one of America’s first ATMs on Long Island in 1969. Chemical Bank and Chase Manhattan merged in 1996.

Thus, JPM Coin fits in with Chase’s long history of technological innovation. However, we do not know enough details about JPM Coin to ascertain its value.

The Threat to JPMorgan Chase

My guess is that JPMorgan Chase is experimenting with cryptocurrency out of fear of tech companies.

I think tech companies like PayPal (NASDAQ: PYPL), Apple (NASDAQ: AAPL), Alphabet (NASDAQ: GOOG), and Facebook (NASDAQ: FB) are among Chase’s most dangerous competitors. To explain, each of those companies offers financial services in direct competition with JPMorgan Chase.

You can you can use PayPal, Apple Pay, or Google Pay instead of your Chase Visa card at the cash register, for instance. In addition, you can access your Chase bank or Visa account through PayPal, Google Pay, or Apple Pay.

Thus, we are living a world where a financial institution is just another app on your phone. We now have entire generations who think of a bank as an app rather than a physical building. In countries like China most people have never used a physical bank.

Meanwhile, the only banking institution most Americans regularly visit it the ATM. That situation helps Chase and other monster banks because it involves no personal relationships.

To explain, personal relationships with bankers create loyalty, apps and websites do not. Thus people have no commitment to local banks or bankers. Moreover, the only reasons people go to the ATM are to get physical cash and to deposit the occasional check.

How Project Libra could Threaten JPMorgan Chase

Project Libra creates an existential threat to JPMorgan Chase’s existence by offering a digital currency that could be an alternative to physical cash.

Chase has four potential responses to that threat. First, it can ignore Libra and hope digital currency goes away, an unlikely development. Second, Chase can try to destroy Libra, which could lead to lead a destructive war with Facebook and its allies.

Third, Chase could join project Libra which surrenders control to Facebook, or whoever Facebook is fronting for. Fourth, JPMorgan Chase & Co can try to compete with Libra by offering its own cryptocurrency.

Chase has chosen the fourth; and I think smartest, option with JPM Coin. Even if JPM Coin fails, Chase will gain important cryptocurrency, blockchain, and digital payments expertise. In addition, Chase could create value technology it could sell or license.

Is Project Libra an Opportunity for JPMorgan Chase?

Finally, if JPM Coin is successful Chase could force Project Libra to add JPM Coin to its ecosystem. To explain, Chase does so much business, Project Libra could have to take it.

There is a very compelling reason why Chase will want access to Libra and Facebook’s incredible ecosystem. JPMorgan Chase could gain access to 6.22 billion users through Facebook.

In detail, Statista estimates Facebook’s four social media networks had 6.22 billion active users in April 2019. In detail, Facebook itself had 2.32 billion active users, WhatsApp had 1.6 billion active users, Facebook Messenger had 1.3 billion active users, and Instagram had one billion active users.

Facebook could become a Bank

It is all those social media users that make a battle with Facebook a losing proposition for JPMorgan Chase. However, offering a cryptocurrency could give JPMorgan Chase access to hundreds of millions of customers outside the United States through Libra.

I think Libra will be a blockchain layer built ontop of Facebook, WhatsApp, Instagram, and Facebook messenger. Facebook and others will offer crytpcourrencies and financial services through Libra.

Thus, Libra could make Facebook into a “bank.” Moreover, Facebook could become the most popular bank on Earth.

Why JPMorgan Chase wants a Digital Currency

In particular, Chase could reach to the 1.7 billion people around the World Bank estimates lack bank access. JPMorgan Chase & Company could service customers in Bolivia, Bangladesh, Yemen, Turkestan, Mozambique, and Madagascar who have never seen a physical bank in their lives.

To explain, those customers could access Chase accounts and use JPM Coin through a JPMorgan Chase app on their phones. This is no fantasy, people in Kenya made 607.4 million mobile money transactions through M-Pesa in 4th Quarter 2017, Capital Business reports.

M-Pesa is the world’s most popular unencrypted digital currency. M-Pesa; the creation of Vodafone subisidary, had 2018 revenues of $615 million, the Harvard Business School estimates.

Will JPM Coin be Better than other cryptocurrencies?

Strangely, JPM Coin could have some serious advantages over existing cryptocurrencies.

First, JPM Coin could be more secure because JPMorgan Chase & Co’s security and technical staff will oversee it. Chase’s professionals could detect security breaches quickly and close holes before they become problems, for instance. This could deter crooks because they will be afraid of getting caught if they try to hack or steal JPM Coin.

Consequently, JPM Coin could require less encryption and fewer security measures. This could make JPM Coin faster and easier to use. To explain, present-day blockchains like Ethereum have a very limited capacity because of all the encryption and security measures.

Will JPM Coin be Scalable?

Critics claim Ethereum, for instance, can only process 15 transactions per second (TPS). Thus Ethereum could crash if you try to process over 15 payments at once through it. This is the great blockchain scalability problem the cryptocurrency pundits are constantly writing about.

Under those circumstances, companies like Amazon (NASDAQ: AMZN), Netflix (NASDAQ: NFLX), and Fortnite creator Epic Games are unlikely to accept Ethereum (ETH) payments.

A less-encrypted JPM Coin could theoretically process several hundred or several thousand TPS. Therefore Epic Games or Amazon will be more likely to accept JPM Coin payments.

Will JPM Coin be a Stablecoin?

Additionally, JPM Coin could be a stablecoin. To explain, a stablecoin is a digital currency that contains a smart contract.

A smart contract is a bot; or digital robot, they design to perform a particular task. A stablecoin smart contract, for example, withdraws fiat currency from a bank or trust account when an somebody cashes or spends an altcoin.

The stablecoin smart contract pays the fiat currency to the payment recipient to ensure liquidity of the cryptocurrency. Thus, a stablecoin is a sort of digital check, a product Chase is very familiar with.

Specifically, a check is a document that orders a bank tor release cash to an individual. A stablecoin smart contract is simply a more advanced version of a check.

Why JPM Coin must be a Stablecoin

Thus, the JPM Coin could instantly pay recipients with fiat currency from a Chase bank account. In addition, the JPM Coin could cover payments with credit from a Chase Visa or MasterCard account or a line of credit.

Consequently, retailers and big business will accept JPM Coin because they know it is good. For instance, you could go to Costco (NASDAQ: COST) and pay for Kirkland peanuts with JPM Coin through the JPM App. Chase will pay Costco will receive US dollars from your checking account or credit from your Visa account. Under those circumstances, no retailer will refuse JPM Coin.

In contrast, a retailer has to go through a complicated process to convert Bitcoin into fiat currency. There retailers refuse to refuse most crypto.

Finally, stablecoins are a proven technology. Many stablecoins; including Coinbase’s USD Coin (USDC); the Dai (DAI), and the Gemini Dollar (GUSD), are on the market right now. Thus, Chase will not have to reinvent the wheel if it makes JPM Coin available.

JPM Coin could add billions of dollars in value to Chase

Theoretically JPM Coin could add billions of dollars in value to JPMorgan Chase & Company (NYSE: JPM).

However, JPM Coin will raise serious legal, ethical, and political questions. Is Chase usurping the role of national governments and undermining Central Banks’ authority for instance. On the other hand, I think Chase can live with those questions because it already faces serious political attacks over its size.

Until then I think JPMorgan Chase is a good stock that is well worth owning. For instance, JPM will pay a dividend of 80₵ on 31 July 2019. Moreover, the dividend grew by 24₵ in 2018 rising from 56₵ on 31 July 2018 to 80₵ on 31 October 2018.

Under those circumstances, JPM shareholders were enjoying a dividend yield of 2.84%, an annualized payout of $3.2 and a payout ratio of 34.9% on 5 July 2019. Plus, reports JPMorgan Chase’s dividend has been growing for eight years.

Plus, I think Mr. Market fairly priced JPMorgan Chase $112.82 on July 5, 2019. In the final analysis, JPMorgan Chase could be the best stock for digital currency investment in the market. JPM is a proven moneymaker that could tap vast new sources of revenue through JPM Coin.