According to Bloomberg reports, JPMorgan Chase, as a global banking giant, surprisingly allows high-net-worth clients to use Bitcoin spot ETFs as loan collateral and even includes crypto assets in their net asset assessment system. It sounds impressive, but to put it bluntly, it treats Bitcoin ETFs as 'quasi-cash assets'.
However, although Bitcoin ETFs have strong liquidity, their price volatility is outrageous! For instance, historical data shows that in 2021, Bitcoin's price soared to $68,000, only to drop to around $16,000 in 2022. This rollercoaster-like volatility means that the value of Bitcoin ETFs could evaporate at any time, making them fundamentally unstable compared to real estate or stocks.
There have been similar economic activities in history, such as the famous 'Orchid Bubble'.
In 1984, the price of Clivia in Changchun skyrocketed to astronomical levels, with a good pot of orchids being able to exchange for a luxury car, even more expensive than gold. But what happened? As soon as the government intervened, the price plummeted, leaving countless investors with nothing.
The current situation of Bitcoin is almost identical to that of the Clivia back then! Its price is completely driven by market sentiment and speculative hype, lacking any real value support. Once the market trend changes and Bitcoin's price plummets, those who used Bitcoin as collateral should be ready for forced liquidation!
The worst part is that official institutions have long sounded the alarm about Bitcoin. Federal Reserve Chairman Powell has repeatedly emphasized that Bitcoin is a high-risk asset that lacks intrinsic value. The U.S. SEC has also issued announcements warning of the risks associated with Bitcoin ETFs, such as price volatility, fraud, and lack of regulation.
Even JPMorgan Chase itself, while publicly claiming to support Bitcoin, only dares to accept ETFs as collateral in practice, rather than directly holding Bitcoin. Isn't this clearly leaving a way out for themselves?
Then there's the liquidation risk, which is simply nerve-wracking. Bitcoin collateral loans usually require borrowers to provide over-collateralization. Once the price drops and triggers forced liquidation, borrowers will not only lose their collateral but may also face huge debts. JPMorgan Chase allowing Bitcoin as collateral this time is like planting a time bomb in the financial market.
Although JPMorgan Chase is wealthy, it cannot afford such risks. Let's not forget that before Lehman Brothers went bankrupt, they were also quite wealthy. The financial market is not lacking in black swan events; no one knows when Bitcoin might suddenly crash. If JPMorgan Chase suffers heavy losses due to Bitcoin collateral, it might trigger a chain reaction, potentially affecting the entire financial system.
Ultimately, Bitcoin fundamentally lacks the basic conditions to be used as collateral. Its price is too volatile, it lacks intrinsic value, and it faces regulatory uncertainty.
What JPMorgan Chase is doing this time, rather than being financial innovation, is more like a gamble.
