Bitcoin has rallied on an epic rally since its lows near $40,000 in late September, with the price rising almost 35% and easily crossing key technical resistance levels.
In a note Thursday, JPMorgan said that Bitcoin’s past $1 trillion market cap is associated with a number of factors, including the growing appetite of institutional investors seeking hedges against inflation. Bitcoin’s growing role as an inflation hedge has eclipsed gold, which has held steady for almost two years, even as concerns about rising inflation rise.
“Institutional investors seem to be returning to Bitcoin, perhaps seeing it as better inflation protection than gold,” JPMorgan said, adding that the trend of money flowing from gold to Bitcoin in previous weeks has resurfaced.
According to the memo, JPMorgan presented three main factors as to why Bitcoin rose from $40,000 to nearly $55,000 in a matter of weeks.
- “Final assurances by US policymakers that it has no intention of following China’s steps to ban the use or mining of cryptocurrencies.”
- “The recent rise of Lightning Network and tier 2 payment solutions helping El Salvador embrace Bitcoin.”
- “The resurgence of inflation concerns among investors has rekindled interest in using Bitcoin as an inflation hedge.”
Investors are taking action as gold has failed to be a reliable inflation hedge in recent months. According to the bank, more than $10 billion has been received from gold ETFs and more than $20 billion into Bitcoin funds since the start of the year.
Also, these flows of funds to Bitcoin helped increase Bitcoin’s share of the total cryptocurrency market to around 45% from a low of 41% in mid-September. “The increase in Bitcoin’s share is a healthy development as it is more likely to reflect institutional participation than smaller cryptocurrencies,” JPMorgan said. used the phrases.
Bitcoin is still 15% below the record level of $65,000 reached in mid-April, while the cryptocurrency is up 86% year-over-year. Gold has lost 7% of its value this year.
Disclaimer: What is written here is not investment advice. Cryptocurrency investments are high-risk investments. Every investment decision is under the individual’s own responsibility. Finally, Koinfinans and the author of this content cannot be held responsible for personal investment decisions.