JPMorgan has given three main reasons as to why Bitcoin rallied from $40,000 to about $55,000 in a matter of weeks.
Bitcoin rallied sharply on October 6, showing the most significant gains since the start of the upward movement in July. According to analysts at JPMorgan Bank, several factors contributed to bitcoin’s rise above $55,000 and further growth is expected.
Throughout the first half of the summer, as Bitcoin declined from the highs, JPMorgan analysts warned of the disappearance of institutional interest, and with the beginning of the market recovery in July, they shifted their attention to the risks of excessive euphoria.
“Increasing the share of bitcoin is a healthy development as it is more likely to reflect institutional participation than an increase in the share of smaller cryptocurrencies,” the latest report said.
At the beginning of the month, JPMorgan analysts noted that ether futures are in the highest demand among institutional investors, while bitcoin derivatives have faded into the background. Commenting on the bias of preference back in favor of bitcoin, they write:
“Preferences appear to have been changing since the end of September along with a sharp recovery in bitcoin performance. This recovery is at least partly due to the covering of short positions, the liquidations of which have increased dramatically over the past week or two. “
JPMorgan names the following factors for the resumption of the rally in Bitcoin:
- “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 recent rise of the Lightning Network and 2nd layer payments solutions helped by El Salvador’s bitcoin adoption.”
- “The re-emergence of inflation concerns among investors has renewed interest in the usage of bitcoin as an inflation hedge.”
“Renewed fears about inflation among investors have sparked an increase in interest in Bitcoin as a hedging medium. Institutional investors appear to be returning to Bitcoin, seeing it as a better inflation hedge than gold. Preliminary signs that were seen during the previous shift in preference from gold to bitcoin during much of the fourth quarter of 2020 and early 2021 have begun to manifest themselves again in recent weeks,” added JPMorgan analysts.
Dynamics of changes in the volume of assets in funds based on bitcoin and gold
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