What’s driving the run in bitcoin and whether it can continue, according to JPMorgan

Published Thu, Oct 21 202110:07 AM EDTUpdated Thu, Oct 21 20213:04 PM EDT

The price of bitcoin is surging, but JPMorgan said the successful launch of the first U.S. bitcoin futures exchange-traded fund is not fueling the rally. "We believe the perception of bitcoin as a better inflation hedge than gold is the main reason for the current upswing, triggering a shift away from gold ETFs into bitcoin funds since September," JPMorgan global markets strategist Nikolaos Panigirtzoglou said. Bitcoin notched a fresh all-time high Wednesday . The world's largest cryptocurrency passed the $66,900 level, topping a previous intraday record of $64,899 set in mid-April. Many investors attributed the record high to the Tuesday launch of the ProShares Bitcoin Strategy ETF , which tracks bitcoin futures contracts pegged to the future price of the cryptocurrency. The ETF trades under the ticker BITO. However, JPMorgan told clients that BITO's launch is "unlikely to trigger a new phase of significantly more fresh capital entering bitcoin." This is largely because of the multitude of investment choices bitcoin investors already have, including direct investment options using digital wallets at Coinbase, Square, PayPal and Robinhood. Instead, Panigirtzoglou said a growing conception that digital assets are a better hedge than gold against rising prices is pushing the price of bitcoin and other cryptocurrencies to new highs. On Wednesday, billionaire investor Paul Tudor Jones told CNBC that he believes inflation is the biggest threat to U.S. markets . He added that bitcoin and cryptocurrencies were his preferred inflation hedge. "Bitcoin would be a great hedge. Crypto would be a great hedge," Jones told CNBC's "Squawk Box." "There's a plan in place for crypto and clearly it's winning the race against gold at the moment ... I would think that would also be a very good inflation hedge. It would be my preferred one over gold at the moment." JPMorgan echoed Jones' sentiment in the note to clients. "We believe that rising of inflation concerns among investors has renewed interest in inflation hedges in general, including the use of bitcoin as such a hedge," Panigirtzoglou said. "Bitcoin's allure as an inflation hedge has been strengthened by the failure of gold to respond in recent weeks to heightened concerns over inflation, behaving more as a real rate proxy rather than inflation hedge," the JPMorgan analyst added. The Wall Street firm said this momentum in the crypto space sets bitcoin up for a strong end to 2021. "This flow shift remains intact supporting a bullish outlook for bitcoin into year-end," Panigirtzoglou said. — with reporting from CNBC's Michael Bloom.

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The price of bitcoin is surging, but JPMorgan said the successful launch of the first U.S. bitcoin futures exchange-traded fund is not fueling the rally.