JP Morgan says Bitcoin owes 38 % rally to three driving factors

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TL;DR Breakdown

  • Bitcoin has been on a bullish run since late September. From lows of $40,000, it has surged to about $50,000.
  • According to JP Morgan, this growth is due to three factors. First, investors are demanding it for hedging. Secondly, regulators have given assurances that they won’t ban cryptos. And thirdly, there’s been a growth of users on the Lightning Network.

Bitcoin (BTC) owes its almost 38 percent rally to three key factors. That’s according to an analysis by banking giant JP Morgan.

The premier crypto has been on a bullish run since late September. It has surged from lows of about $ 40,000 to the current highs of $55,000. The increase represents a 37.5% leap and has enabled it to break through crucial technical resistances.

BTC’s rising fortunes have seen its market valuation surpass the $1 trillion mark. And in a Thursday note to the press, JP Morgan has tied down the growth to three factors.

Bitcoin is a better hedge than gold

The bank says that principal among these reasons is the growing belief in BTCs hedging abilities. In its analysis, JP Morgan holds that institutional investors prefer it over gold for hedging purposes.

It goes on to say that investors are jittery about growing inflation. In turn, these fears are pushing them to the crypto. 

To drive its point home, JP Morgan provided data comparing investments in both assets. Since the year’s turn, investors have withdrawn $10 billion from gold Exchange Traded Funds (ETFs). In contrast, they’ve invested twice the amount in BTC funds.

Again BTC’s price continues to soar while gold declines. The year-to-date (YTD) values indicate that BTC has grown a whopping 86 percent. In the same period, gold has lost 7 percent emphasizing why many prefer the former.

SEC’s reassurances on crypto have bolstered BTC’s price

Another reason for this jump is the Securities and Exchange Commission’s (SEC) tacit endorsement of cryptos. JP Morgan’s analysis suggests that the SEC’s reassurances that it wouldn’t ban crypto mining have helped shore up BTCs prices.

Gary Gensler, SEC’s chair, has insisted that the US wouldn’t follow China in prohibiting crypto activity. The latter has been making news for its anti-crypto campaign. Last week it released the 2021 list of negative market access.

The list shows sectors in the Chinese economy where residents and foreigners can’t invest in. Crypto mining featured prominently on it.

El Salvador’s BTC adoption has shored its price

Finally, the bank suggests that El Salvador has a hand in BTC’s bullish run. Early this year, the country adopted the crypto as its legal tender. Besides curbing hyperinflation, the nation sought the crypto for financial inclusion.  

JP Morgan insists that the country’s move grew the Lightning Network’s user base. The network is a layer 2 blockchain (BC) protocol. It allows for timely transactions over the BTC BC.

Salvadoran President Nayib Bukele claims that up to 2.1 million of his countrymen have embraced BTC. They’re using the government-backed Chivo wallet to transact in BTC. Onboarding such a significant number of users secures the BC and increases BTC’s value.

Other analysts attribute BTC’s bullishness to its resilience amidst China’s crypto purge. Despite the currency taking a hit initially, it corrected its price following the migration of mining activity to crypto-safe destinations.

All indicators suggest that the currency will maintain its upward trajectory. At the time of writing, it’s exchanging at $55,406. 

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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