This week, two important events took place for Bitcoin at once – the price of the cryptocurrency again broke above the $ 50 thousand line, and its capitalization reached the trillion dollar mark.
The local growth of the cryptocurrency was driven by demand from institutional investors, that is, large organizations looking for an asset to protect their capital from inflation.
This is the official information from JPMorgan Bank’s newsletter to its clients.
Why Bitcoin has grown
According to analysts, the main danger of global markets now is rapidly growing inflation, which leads to the depreciation of investments. This is why institutions are betting on Bitcoin. Still, the cryptocurrency has a limited supply of 21 million coins, which cannot be increased if governments wish or if problems arise in the global economy. Accordingly, with a constantly growing demand, the BTC rate is quite justifiably going up.
New investor concerns about rising inflation have made Bitcoin a popular defense against it again. Institutional investors start buying cryptocurrency, considering it even a better asset than gold in this situation.
That is, the expert believes that the current run in the price of Bitcoin is due to large investors. The latter want to protect their funds from depreciation, so they are trying to find a more profitable option for their investment. And in this case, it was BTC that became this tool.
This can be seen both in the general trend and in the comments of individual investors with large capital. For example, recently the famous millionaire and star of the Shark Tank TV show Kevin O’Leary stated that his investment portfolio contains more cryptocurrencies than gold .
In addition to the above quote, JPMorgan experts mentioned two other factors that contributed to the recent rise in the value of Bitcoin. Here’s a quote from Cointelegraph.
First, recent assurances from US politicians that they do not intend to follow China’s strategy of completely banning the use or production of cryptocurrencies have had a positive effect on the crypto market. Secondly, the growing popularity of the Lightning Network and second-tier payment solutions played a big role in the background of the official adoption of cryptocurrency in El Salvador.
Fundamental positive trends are not limited to Bitcoin alone. According to Cointelegraph journalists, the amount of ETH held in dollar terms by cryptocurrency miners has reached its highest since 2016. At the moment, miners keep on their wallets a little more than 532 thousand ETH, or 0.45 percent of all coins in circulation.
Accordingly, they are counting on the growth of the cryptocurrency rate in the future. Given the potential changes to the ETH consensus algorithm for Proof-of-Stake and the introduction of sharding next year, such a calculation seems quite justified.
The hashrate of Ethereum, often seen as a reflection of the health and safety of the network, plummeted during the exodus of miners from China this spring. The rate dropped to 477 terahashes per second at the end of June, but has already fully recovered over the past three months and reached new records. Currently, it has grown by 150 percent since the beginning of the year, that is , there are more and more Ethereum miners.
This is despite the fact that China-based cryptocurrency mining pools have gone out of business, with SparkPool and BeePool suspended in recent weeks. Most likely, many Chinese miners moved their equipment to other regions of the world, where the attitude towards their business is more loyal. During this time, new players joined the race, trying to make a profit against the background of a noticeable drop in mining difficulty.
We believe that now the cryptocurrency market has begun to look really ready for growth. Bitcoin is getting closer to its all-time high and even jumps by ten percent in a week. At the same time, the niche is noticeably far from its bottom, which was observed in May and summer. So now it is probably worth going over to the side of the bulls, but at the same time do not forget about risk management.
