Is Bitcoin a Better Inflation Hedge Than Gold? Institutions Think So, According to JPMorgan

Last updated: Mar 30, 2023
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Banking titan JPMorgan has revealed that financial institutions may be leaning towards Bitcoin (BTC) as a store of value rather than tried and true gold.

According to a report from Markets Insider, JPMorgan said in a note that institutions are beginning to perceive Bitcoin as a hedge against inflation, which is potentially causing gold to lose steam.

"Institutional investors appear to be returning to bitcoin perhaps seeing it as a better inflation hedge than gold," JPMorgan said. The bank added that a prior trend of money flowing out of gold and into bitcoin has reemerged as of late.

The growing narrative of Bitcoin being an inflation hedge was included in JPMorgan's list of catalysts behind the top crypto's quick rally from $40,000 to $55,000 the past week. According to the bank, the three likely fundamental factors behind BTC's strength as of late are:

1. "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."
2. "The recent rise of the Lightning Network and 2nd layer payments solutions helped by El Salvador's bitcoin adoption."
3. "The re-emergence of inflation concerns among investors has renewed interest in the usage of bitcoin as an inflation hedge."

JP Morgan and Bitcoin
Institutions are becoming more bullish on Bitcoin.

Crypto enthusiasts may also be keen to point out that Bitcoin is up over 85% in the last year, whereas gold is down 7% in the same timeframe, and nearly break even in the last decade.

A similar view has been shared by Dawn Fitzpatrick, CEO of Soros Fund Management, the hedge fund owned by famed billionaire investor George Soros.

In March, she said that when looking at gold's price action alongside a prominent narrative of inflation lately, the yellow metal has "struggled getting traction and I think that’s because Bitcoin is taking some of its buyer base away.”

"When it comes to crypto, generally, I think we’re at a really important moment in time in that something like Bitcoin might have stayed a fringe asset but for the fact that over the last 12 months we’ve increased the money supply in the US by 25%, so there’s a real fear of debasing of fiat currencies…"

Fitzpatrick also said in an interview with Bloomberg that Bitcoin had crossed the chasm into mainstream, and was even more than just an inflation hedge.

While JPMorgan continues to concede subtle bullishness towards Bitcoin, CEO Jamie Dimon is still standing his ground with repeated criticisms. In 2017, Dimon called Bitcoin a "fraud," and as recent as this month, the CEO said the top crypto was a "a little bit of fool's gold."

“I’ve always believed it’ll be made illegal someplace, like China made it illegal, so I think it’s a little bit of fool’s gold... You can call it a security or an asset or something like that, but if people are using it for tax avoidance and sex trafficking and ransomware, it’s going to be regulated, whether you like it or not."

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Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.

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