[Bitcoin Now] Nearing All-Time High... Is Inflation Concern the Cause?

JP Morgan: Bitcoin Rises Due to Perception as a Better Inflation Hedge Than Gold

On the 21st, the Bitcoin price was displayed on the Coinone customer center monitor in Yongsan-gu, Seoul. The upward trend in Bitcoin's price appears to be influenced by increased expectations that cryptocurrencies have entered the mainstream financial market following the launch of the United States' first Bitcoin-related exchange-traded fund (ETF) trading. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Gong Byung-sun] The leading cryptocurrency Bitcoin has surged to near its all-time high in domestic prices. While the launch of Bitcoin futures exchange-traded funds (ETFs) on the U.S. stock market had a positive impact, there is also an interpretation that Bitcoin prices soared due to concerns about inflation.

According to the domestic cryptocurrency exchange Upbit, as of 12:01 a.m. on the 21st, Bitcoin recorded 81.75 million KRW, up 3.78% from the previous day. This is close to the all-time high of 81.99 million KRW recorded on April 14. As of 2:38 p.m. on the same day, Bitcoin has somewhat stalled, recording 79.08 million KRW.

In the U.S. market, Bitcoin hit a new all-time high. According to cryptocurrency market data site CoinMarketCap on the 20th (local time), Bitcoin rose to $66,930 (approximately 78.82 million KRW) during the trading session. The previous all-time high was $64,899 recorded on April 14.

The successful launch of Bitcoin futures ETFs on the U.S. stock market acted as a positive factor. On the 19th, the ProShares Bitcoin Strategy ETF (BITO), a Bitcoin futures ETF by asset management firm ProShares, began trading on the New York Stock Exchange (NYSE). On its first day of trading, BITO closed up 4.85%, attracting investors' attention. On the 20th, BITO continued its upward trend, rising 3.20%.

This ETF tracks Bitcoin futures traded on the Chicago Mercantile Exchange (CME) but appears to also influence the spot price of Bitcoin. Since Bitcoin futures ETFs are interpreted as a signal of institutional adoption, the possibility of launching a Bitcoin spot ETF is also being anticipated. James Seyffart, a researcher at Bloomberg Intelligence, a research arm of Bloomberg, explained, "This Bitcoin futures ETF will serve as a bridge to the launch of a Bitcoin spot ETF."

[Image source=Reuters Yonhap News]

Meanwhile, there is also an interpretation that concerns about inflation, rather than the launch of the Bitcoin futures ETF, are the actual cause of the price increase. According to U.S. economic media Bloomberg on the 20th, researchers at JP Morgan, a major U.S. investment bank including Nikolaos Panigirtzoglou, analyzed, "The launch of BITO itself probably did not trigger capital inflows into Bitcoin," and "The perception that Bitcoin is a better hedge against inflation losses than gold is the reason for the upward trend since September this year."

In fact, although concerns about inflation have increased recently, gold futures prices have been sideways. Since October, gold futures have not broken above the $1,700 level. This contrasts with Bitcoin, which has risen about 48% this month alone. JP Morgan explained, "Concerns about inflation support the forecast that Bitcoin will show strength until the end of the year."