Wednesday Bitcoin hit a new all-time high as investors acclaimed the successful launch of the first US Bitcoin futures exchange-traded fund (ETF). According to Coin Metrics, the world’s largest cryptocurrency surged 4%, passing the $66,900 level, topping a previous record of $64,899 set in mid-April. However, JPMorgan strategists believe the key driver behind the price jump is investor concern over inflation.
Jesse Proudman, CEO of crypto robo-advisor Makara, said, “The key here is whether we are able to establish support above $65,000. If we can, the classic Q4 crypto rallies we’ve seen in most years could take Bitcoin towards some of the loftier price predictions we’ve seen over the past several months. If sell pressure takes over, though, our next leg up could take a while to materialize.”
Billionaire investor Paul Tudor Jones called crypto his preferred inflation hedge over gold: “Bitcoin would be a great hedge. Crypto would be a great hedge,” Jones told CNBC. “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.”
The first Bitcoin-linked exchange-traded fund has made its debut officially on October 19. The much-anticipated ETF from ProShares, which tracks the Bitcoin futures market, began trading Tuesday on the NYSE under the ticker “BITO” and rose nearly 5% on its first day of trading.
Not everyone in the crypto market was impressed. Several Bitcoin investors want an ETF that tracks spot prices rather than futures.
“More products are great, but I just don’t see the point of investing in futures-based Bitcoin ETFs when you can buy the asset in the spot market,” said Jodie Gunzberg, managing director of CoinDesk Indexes.
“It’s not like oil or cattle that is impossible to hold physically for most investors. It’s more like gold that can be easily held. Except the cost is more like oil,” she added.
“2021 will be remembered for this milestone,” Michael Sapir, the CEO of ProShares, told the New York Times. Investors who are curious about crypto but hesitant to engage with unregulated crypto exchanges want “convenient access to Bitcoin in a wrapper that has market integrity,” he said. For nearly a decade, crypto entrepreneurs and traditional finance firms have sought permission to launch a Bitcoin ETF in the US, but their applications have been delayed or denied by the SEC. Many remain pending.
Still, it’s a landmark for the nascent crypto industry, which has long been pushing for greater acceptance of Bitcoin and other digital currencies on Wall Street.
However, JPMorgan Chase strategists believe the key driver behind the price jump is investor concern over inflation.
The BITO launch, which saw the highest-ever first-day natural volume for an ETF, is “unlikely to trigger a new phase of significantly more fresh capital entering Bitcoin,” JPMorgan strategists said in a note.
Instead, JPMorgan believes that as gold failed to respond to concerns over rising cost pressures in the last couple of weeks, Bitcoin’s renewed role as a better hedge against inflation in the eyes of investors is the main reason for the current bull run. The team highlighted that the shift away from gold ETFs into Bitcoin funds has been gathering speed since September and “supports a bullish outlook for Bitcoin into year-end.”
The JPMorgan strategists exemplified the waning interest after the first week following the launch of the Purpose Bitcoin ETF (BTCC) in Canada, claiming that the initial hype surrounding BITO could also fade after a week.