Don’t dismiss bankers’ predictions of a bitcoin bubble – they should know

  • Jamie Dimon, the chief executive of JP Morgan, said last week that the ascendancy of the virtual currency bitcoin – which has risen in price from just over $2 in 2011 to more than $4,000 at points this year – reminded him of tulip fever in 17th-century Holland.
  • Taking out a mortgage denominated in bitcoins is not advisable and, luckily for those stupid enough to try it, you won’t find a high street bank willing to underwrite it.
  • But some of the perceived flaws behind bitcoin that alarm Dimon – no central authority, a public ledger of transactions – point to the foundations of a new financial establishment.
  • Dimon, a modern high priest, faces a rival value system in bitcoin.
  • Households might cope with a move to 0.5%, but if a rate increase augurs a sustained move against cheap borrowing and persistent inflation, then a wider rethink of ambitions, from getting further up the housing ladder to buying a new car, will be needed.

The virtual currency’s success reflects the continuing lack of trust in traditional banking following the credit crunch
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