Bitcoin (BTC) finally saw a significant price increase last week, bringing the cryptocurrency back to $55,000 for the first time since May and has a market capitalization above $1 trillion.
According to JPMorgan Chase, the largest bank in the United States, this price increase is mainly due to institutional investors seeking a safe haven to hedge against inflation. Business Insider reported on October 7:
These are the 3 main drivers behind bitcoin’s 35% rally over the past week, according to JPMorgan https://t.co/JWQf9aeQTZ
— Markets Insider (@MktsInsider) October 7, 2021
“The return of inflation concerns among investors has renewed interest in using bitcoin as an inflation hedge. Institutional investors appear to be returning to bitcoin and may see it as a better inflation hedge than gold.”
According to JPMorgan analysts, who are now saying the opposite of what struck them in May. Then money flowed from bitcoin to gold. According to JPMorgan, gold no longer acts as a reliable hedge against inflation and more than $10 billion has been out of gold since the beginning of this year exchange traded funds (ETFs) poured in as more than $20 billion was put into bitcoin funds.
JPMorgan also lists two more factors that led to the recent price increase of bitcoin. The first is that US policymakers recently assured that they will not follow in China’s footsteps and will not ban crypto trading or mining. The analysts may be referring to the recent statements by Gary Gensler, chairman of the US Securities and Exchange Commission (SEC).
The second factor is the rise in popularity of so-called layer-2 scaling solutions like Lightning Network, perhaps powered by the bitcoin law in El Salvador. JPMorgan just says nothing about the possible approval of a bitcoin futures ETF by the SEC that currently has the market under ban.
JPMorgan reported a few weeks ago that major investors are dumping bitcoin futures and switching to ethereum (ETH) futures.