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JP Morgan says institutions prefer Bitcoin to gold as inflation hedge

JP Morgan, the largest investment bank in the world, says institutional investors are refocusing on Bitcoin as they see it as being superior to gold as a guard against inflation.

Reports emerged as Bitcoin surged past a $1trn market cap this month, while gold remains above $11trn.

“There are tentative signs that the previous shift away from gold into bitcoin seen during most of Q4 2020 and the beginning of 2021 has started reemerging in recent weeks,” JPMorgan’s Nikolaos Panigirtzoglou wrote in an Oct. 6 research note to clients.

"The re-emergence of inflation concerns among investors has renewed interest in the usage of bitcoin as an inflation hedge," the note said. "Institutional investors appear to be returning to bitcoin perhaps seeing it as a better inflation hedge than gold."

At the time of writing, the price of gold is below $1,800 per ounce, 7% down in 2021, despite persistent reports of high and non-transitory inflation. Bitcoin on the other hand is up by well over 80% year-to-date , sitting just below $55,000.

Panigirtzoglou alluded to “the failure of gold to respond in recent weeks to heightened concerns over inflation” as a possible reason for the return by investors to Bitcoin.

Over the long-term, going back to the period of the Romans, gold has proved itself as a way to protect against inflation. However, more recently it appears to be giving way, at least partially, to an upgraded digital version. Having said that, Bitcoin has quite a way to get before it gets to gold’s level, and there are many questions yet to be answered.

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