Bitcoin’s local rally this week was aided by institutional interest, the growing popularity of the Lightning Network for micro-payments, and assurances from US authorities that there is no plan to ban cryptocurrencies. This was stated by JPMorgan analysts in a client note, per Markets Insider.
Over the past week, Bitcoin price rose more than 26%, according to CoinGecko. On Wednesday, October 6, quotes crossed the $55,000 mark, and on October 8 tested the $56,000 level. At the time of writing, the asset was trading near $55,400.
According to the bank’s analysts, institutional investors are increasingly using Bitcoin as a hedge against inflation. Gold prices also point to this trend, remaining in a narrow range of $1,700-$1,900 over the past year despite rising fears of money debasement.
“Institutional investors seem to be returning to Bitcoin, perhaps viewing it as a better inflation hedge than gold,” the note says.
Analysts also noted a prior trend of capital flowing from precious metals into cryptocurrencies in recent weeks. They said that since the start of the year, more than $10 billion had flowed out of gold-oriented ETF funds. At the same time, Bitcoin-linked funds have drawn more than $20 billion.
JPMorgan noted that the legalization of Bitcoin in El Salvador helped boost the Lightning Network. In September, the capacity of the network grew by 25%, and the number of nodes and channels rose by 3.4% and 5.8%, respectively.
The solution’s popularity was also aided by the integration of Bitcoin donations on Twitter.
Assurances by American politicians that they do not intend to follow China’s path toward a complete ban on cryptocurrencies also encouraged investors, JPMorgan said.
Fed Chair Jerome Powell, at the end of September, said that the agency does not plan to block digital assets although it believes some should be brought into the regulatory framework.
In October, a similar statement was made by SEC Chairman Gary Gensler . He stressed that most cryptocurrencies meet the status of investment contracts, and that stablecoins pose a threat to financial stability.
Earlier, JPMorgan analysts said that institutional investors shifted Ethereum futures from similar Bitcoin-based instruments.
Earlier, Jamie Dimon, head of the financial group, acknowledged a tenfold rise in Bitcoin, but declined to buy it.
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