Institutions have resumed their appetites for bitcoin instead of gold, strategists at giant Wall Street bank JPMorgan Chase & Co. have said. Consequently, they attributed the recent price surge to new multi-month highs to substantial purchases coming from large investors.
Guess who’s back?
Institutional demand for bitcoin is a relatively new concept in the cryptocurrency space. Until 2020, it was negligent at best, but the COVID-19 pandemic and the subsequent extreme measures undertaken by world governments changed the tides.
Bitcoin has gone from “magic money on the Internet” to an investment tool that could serve as a hedge against rising inflation. Prominent investors and institutions started rushing in late 2020 and early 2021, which propelled BTC’s price to shot up to $65,000.
Soon after, reports began to appear claiming that institutions had stopped accumulating much of the cryptocurrency; some even made huge gains in just a few months and left the market.
This also coincided with BTC’s price cool-off, which, combined with the most recent Chinese FUD, led to a 65% correction in two months.
According to JPMorgan’s latest update on the matter, however, institutions have reappeared in the bitcoin landscape. Furthermore, they asserted that such investors could continue purchasing because they see bitcoin as the better alternative to gold.
“Institutional investors seem to be reverting to bitcoin, perhaps viewing it as a better hedge against inflation than gold.”
With BTC increasing to roughly $55,000 as of now, this means that the cryptocurrency is up by 85% since the start of the year. In the same period, gold – historically considered the most popular safe haven tool – fell by 7%.
More Potential Reasons?
JPMorgan’s analysts also touched upon a few other potential reasons behind BTC’s latest surge. Similar to CryptoPotato’s article about it, they said it could be a positive reaction due to encouraging words from US officials – Fed Chairman Jerome Powell and SEC boss Gary Gensler – who both claimed the country did not had no intention of banning digital assets.
Aside from the “re-emergence of inflation concerns” and the “usage of bitcoin as an inflation hedge,” the strategists also added that the growth of the Lightning Network could have played a role.
Layer 2 payment solution has seen significant adoption lately, being used by El Salvador and Twitter. Many people view it as the necessary improvement of the Bitcoin network, which could speed up smaller transactions and help avoid congestions.
