So, Bitcoin surged above $5,000 for the first time overnight, and at one point blew through $5,200 apparently on its way to $500,000 which we certainly hope it will hit sooner rather than later in order to help us all avoid this rather unpalatable scenario:

Here’s the chart:

Now, for one thing, that YTD “performance” (if you want to call it that), is all kinds of absurd. Just to be clear, when you read posts/articles penned by Bitcoin proponents documenting that inexorable ascent do note that if that were a stock, those same people would be shouting from the rooftops about “fraud” – even if they had no evidence whatsoever to support such an accusation.

In this case, on the other hand, there are very real reasons to believe that the entire model is akin to a pyramid scheme. Recall this from JPMorgan’s Marko Kolanovic:

Another worrying aspect of cryptocurrencies are some parallels to fraudulent pyramid schemes. Initiator of a pyramid scheme often ensures ownership of a disproportionally large share of future profits. For instance, in the case of bitcoin, it is believed that an unknown person (or persons) known as ‘Satoshi Nakamoto’, before disappearing, mined the first 1-2M coins or ~10% of the coins that will ever exist ($4-8bn USD current value).  While initial mining requires a negligible effort, the benefits for subsequent participants start diminishing. Mining becomes progressively more difficult, and eventually unprofitable, marking the likely end of a scheme. A way around this in Pyramid schemes is to bypass the original chain and start a new one of your own. The cryptocurrency analogy would be to start a new coin if it is more profitable than mining the existing one. This can work as long as there are enough willing and uninformed buyers.

Anyway, there’s actually a reason we wanted to go back over this. This morning, JPMorgan reported results and the FICC number was funny. Specifically, 3Q FICC sales & trading revenue came in at $3.16 billion, missing estimates. That was down a rather precipitous 27% y/y and the culprit was exactly what you would expect: “low volatility and tighter credit spreads.”