JP Morgan: Institutions Are Buying Bitcoin Rather Than Gold As Inflation Increases
Bitcoin recently broke the $50,000 resistance level and held a bullish trend which started last week. This week alone, bitcoin has done 35% in profits, reaching its $1 trillion market cap.
It appears, however, that the reason for this strong bullish trend is that institutions are turning to bitcoin as a hedge against the inflation that is currently hitting financial institutions across the world.
According to JP Morgan, bitcoin’s recent bullish moves are due to the positive attitude of institutional investors towards the token. JP Morgan said this in a statement that it sent to investors late on Thursday. In the note, the bank said that the return of inflation has caused concerns among investors and that has forced them to increase interest in bitcoin.
The bank also went ahead to state that investors are now seeing bitcoin as a better investment than gold to hedge against inflation. It said that institutional traders show more favor to bitcoin than gold.
Other Factors Backing Bitcoin Confidence
In the statement to its clients, JP Morgan identified two other factors that it believes contribute to the recent confidence of investors in bitcoin as an asset against inflation.
According to JP Morgan, the US government’s announcement that it won’t copy China’s ban on cryptocurrency but rather seek ways to regulate it and prevent the use of cryptocurrencies for illegal purposes helped investors’ confidence in the asset.
The investment bank also identified the latest lightning-fast networks and second-layer payment solutions and El Salvador’s bitcoin policies as the second reason why investors are abandoning gold for bitcoin. Although more people are calling for cryptocurrency to be regulated have increased, investors believe that the US is positively disposed toward the asset.
Bitcoin Price Change in September
Bitcoin price is currently above the $50,000 resistance which it failed to go past since May 2021. The asset went through months of bearish market structure and only began to pick up in September. Investors have shown their faith in the sustained bullish trend as Derbit, the largest bitcoin options exchange, reported a higher number of contracts on a Call option for bitcoin in the last three days.
As many investors predict a $100,000 price in December, there is little surprise over the bank’s report that more institutions are turning to the asset. This is a sharp contrast to the asset price situation from May through August when price levels hit low levels.
Recent crackdowns and calls for stricter regulations for the cryptocurrency industry heavily impacted the bearish trend that bitcoin experienced in recent months, but as the price has rallied against those odds, investors expect a shift from gold as an asset to hedge against inflation.
In a recent tweet, Michael Saylor, one of the known crypto whales, said that as banks and the regulators of the financial sector are implicitly endorsing bitcoin, the rise of bitcoin as a hedge against inflation for both traditional and institutional traders, and the collapse of traditional gold will be accelerated.
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