Bitcoin Surges Past $50,000 As “Institutional Investors” Trust Crypto Over Gold For Inflation Hedging

Bitcoin has once again topped the $50,000 mark, and the current crypto run shows no signs of slowing down despite numerous politically driven setbacks in the space. China’s recent ban on the use of cryptocurrencies, and pending decisions on federal regulation only appear to have fueled investors’ fervor in backing bitcoin, with prices pushing past $56,000 on Thursday, its highest in more than five months.

After hovering at $40,000 for nearly a week, the 35% increase saw bitcoin push past the $1 trillion market valuation mark. In a note to investors on Thursday, analysts at JPMorgan credited the steep resurgence to institutional investors piling on in hopes of hedging inflation. Investors have traditionally turned to gold when looking to hedge inflation, but cryptocurrencies have quickly become a favorite target, disrupting the gold market pricing in the process.

Gold has struggled over the past few months to serve as a dependable hedge against inflation and investing trends make apparent that investors are putting their faith in digital-based properties over traditional gold.

Estimates suggest that gold exchange-traded funds have seen more than $10 billion in investors’ cash move out of the space in 2021 alone. Bitcoin funds, on the other hand, have seen more than $20 billion in investments come in over the first 10 months of the year.

The note stated that “institutional investors appear to be returning to bitcoin perhaps seeing it as a better inflation hedge than gold,” and further revealed that this trend has returned and become increasingly popular over recent weeks.

Still 15% shy of its record price of $65,000, bitcoin is still up more than 85% on the year. Gold, on the other hand, has seen its value fall 7% over the same time frame.

JPMorgan defended their belief that the surge was fueled by institutional investors, citing the lift in bitcoin’s market share of the crypto space. “The increase in the share of bitcoin is a healthy development as it is more likely to reflect institutional participation than smaller cryptocurrencies.”

Bitcoin currently represents 45% of the cryptocurrency market, significantly up from the 41% it had represented in mid-September.

The note went on to list three factors that the investing firm felt were most responsible for the sudden and significant increase in bitcoin value.

-“The recent assurances by US policymakers 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.”

The recent run has obviously been fun for both investors and advocates, but it does highlight the overall volatility that exists in the market.

Bitcoin reached its record highs in the mid-$60,000s back in April, but prices were cut in half three months later, falling under $30,000 by late July. These sudden price swings have become part of the thrill, but for serious cryptocurrency investors, a sudden plunge can prove to be detrimental.

For this reason, experts suggest including crypto in your portfolio, but to limit it to 5% of your total investments. These markets are volatile, sure, but many recommend the ‘get it and forget it’ approach, where one buys the coin as a long-term play and doesn’t react to the expected market jumps.

Traditionally bitcoin prices have risen, and at a pretty steady pace. A run that sees a 40% increase in value is likely to be followed by a subsequent dip. A drop of 30% is enough to make anyone question their investment, but when coupled with the gains, bitcoin has produced an overall positive trajectory.

Of course, the interest in bitcoin has further fueled the altcoin movement, as crypto investors eagerly seek alternative forms of cryptocurrency that could hold massive short-term profit potential.

If you thought bitcoin was volatile, the altcoin market has proven to be outright dangerous at times, often driven by pockets of online warriors looking to collectively influence the pricing for a ‘communal gain,’ only to leave naive investors holding the bag when the big players jump ship and send prices crashing.

Dogecoin was the posterchild of this memecoin movement, with ‘to the moon’ rallying cries taking over social media feeds as crypto investors hoped to collectively inflate the value of the coin itself.

Ironically, Dogecoin is losing ground to a new batch of memecoins looking to replicate the 10,000% price increase Doge has produced over the last 12 months.

Shiba Inu, yes another cryptocurrency that features the likeness of man’s best friend, is now being championed as the ‘Doge Killer’ after gaining popularity following a shoutout from Elon Musk. The coin is currently up 350% on the year, and further represents both the beauty and the beast of crypto investing.

Blockchain-based currencies are here to stay. That part is pretty clear.

Deciding which manages to overcome potential regulatory setbacks and political hurdles is the better question. Bitcoin is the safest long-term bet on the board, for obvious reasons, and while these other altcoins can offer the hopes of quick profits, these are great options for those looking to ‘play’ in the market, but should not make up a large part of anyone’s portfolio.

In short: bitcoin… buy some. Hold on to it and forget about it. You will thank me in a few years. 

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