Bitcoin (BTC) has led a 35% rally this week by soaring far above the $50,000 resistance level and restoring a $1 trillion market capitalization to the asset.
According to a note shared by JPMorgan with clients on Thursday, the recent increase in price for BTC was predominantly attributed to institutional investors looking for a hedge to inflation.
“The re-emergence of inflation concerns among investors has renewed interest in the usage of Bitcoin ( $29,625.00 ) as an inflation hedge,” the analysts said, arguing there has been a shift in perception as to the merits of BTC in relation to gold.
“Institutional investors appear to be returning to Bitcoin ( $29,625.00 ) perhaps seeing it as a better inflation hedge than gold”
Institutions aren’t alone there: Shark Tank star Kevin O’Leary stated earlier this week that crypto now accounts for a larger allocation in his portfolio than gold does.
The momentum toward Bitcoin ( $29,625.00 ) is in contrast to a JPMorgan report in May, when analysts noted big investors at the time were switching out of Bitcoin ( $29,625.00 ) and into traditional gold.
The implicit endorsement of Bitcoin ( $29,625.00 ) by major banks and regulators is going to accelerate the collapse of #Gold and the rise of #Bitcoin as the preferred safe-haven store of value for both institutional and retail investors.https://t.co/7os1ojenHs
— Michael Saylor⚡️ (@michael_saylor) October 7, 2021
JPMorgan provided two other factors it believes are behind the current rally:
“The recent assurances by US policy makers that there is no intention to follow China’s steps towards banning the usage or mining of cryptocurrencies,” the analysts noted, as well as:
“The recent rise of the Lightning Network and 2nd layer payments solutions helped by El Salvador’s Bitcoin ( $29,625.00 ) adoption.”
Unlike other analysts this week, JPMorgan did not cite speculation around the imminent approval of a Bitcoin ( $29,625.00 ) futures ETF as a significant driver of the price.
BTC now trades at $53,884.76 according to CoinMarketCap at the time of writing.
Related: Crypto exposure has positive impact on investment portfolios, study shows
Despite some divisions of JPMorgan expressing a growing interest in crypto assets and blockchain initiatives, CEO Jamie Dimon stated in an interview on Oct. 22 that he remains a skeptic of BTC and even compared it to “a little bit of fool’s gold”.