Updated 11 Oct, 2021

Institutions Flock to Bitcoin Rather Than Gold, JPMorgan Says

Two stalls with Bitcoin and Gold written on them and people queuing in front of Bitcoin stall on a purple backgroundInstitutions Flock to Bitcoin Rather Than Gold, JPMorgan Says

Key Takeaways:

  • A JPMorgan report says institutional investors prefer bitcoin instead of gold as an inflation hedge
  • The report highlights growing interest among money managers toward cryptocurrency

JPMorgan Says Bitcoin Demand is Growing

Since the beginning of October, the price of Bitcoin rose by 35%. More than that, the orange coin hit a four-month high reaching a price level of nearly $57,000. In other words, bitcoin hovered about 14% away from its all-time high of $64,800 set on April 14.

Against this backdrop, Wall Street giant JPMorgan published a research note, addressing the epic rally of bitcoin this month.

“Institutional investors appear to be returning to bitcoin perhaps seeing it as a better inflation hedge than gold,” JPMorgan said. Analysts from the bank went on to explain that three reasons stood behind the surge from $40,000 to over $55,000.

The Bank Cites Three Drivers for The Bitcoin Price Rally

First, they said, was “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.” On that note, three major financial institutions in the US said they have no plans to ban Bitcoin.

These are the Federal Reserve, the Treasury Department, and the Securities and Exchange Commission. Furthermore, the crypto industry is optimistic they will introduce regulations that would allow the market to keep growing.

The second reason JPMorgan analysts cite is “the recent rise of the Lightning Network and 2nd layer payments solutions helped by El Salvador’s bitcoin adoption.” In more detail, the small Central American country made Bitcoin legal tender on Sep. 7. Since then, El Salvador has bought 700 BTC and President Nayib Bukele said recently that 3 million Salvadorans use bitcoin.

And finally, the third reason is “the re-emergence of inflation concerns among investors.” The report says the swift climb in consumer prices “has renewed interest in the usage of bitcoin as an inflation hedge.”

Gold vs Bitcoin

The “gold vs bitcoin” debate has been looming in recent months. That said, the JPMorgan research highlights those institutional funds have been increasingly flowing out of gold and into bitcoin. In practice, more than $10bn have been taken out of gold funds this year. In contrast, over $20bn have been ploughed into bitcoin funds for the same period, the bank says.

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