Bitcoin has experienced an incredible rally from its September lows of $40,000, quickly surpassing technical resistance levels and gaining almost 35%.
Bitcoin’s rise past a $1 trillion market value is due to a variety of factors, JPMorgan stated in a note Thursday. Bitcoin’s increasing role as an inflation hedge has helped to lift gold prices which have been flat for nearly two years despite growing concerns about rising inflation.
JPMorgan stated that institutional investors are returning to bitcoin, possibly because it is a better inflation hedge than Gold. JPMorgan also said that the previous trend of money flowing into bitcoin from gold has been resurrected in recent weeks.
According to the note, JPMorgan provided three major reasons why bitcoin rose from $40,000 to $55,000 in just a few weeks.
1. “The US policymakers have recently assured that they are not going to follow China’s lead in banning cryptocurrency mining and usage.”
2. “The Lightning Network’s recent growth and 2nd-layer payments solutions were helped by El Salvador’s adoption of bitcoin.
3.Investors are taking steps as gold has failed to provide an inflation hedge over the past months. According to the bank, over $10 billion has been withdrawn from gold ETFs since the beginning of the year while more than $20 million has gone into bitcoin funds.
These fund flows helped bitcoin grow to almost 45%, up from 41% at the beginning of September. JPMorgan stated that the increase in bitcoin’s share is a positive development because it’s more likely to reflect institutional involvement than smaller cryptocurrencies.
Although bitcoin is still 15% below its record high at $65,000 in mid-April (which was reached in April), the cryptocurrency has risen 86% over the past year. Gold is currently down 7%.