Despite recent regulatory headwinds, the cryptocurrency market has rallied strongly over the last month, with bitcoin (BTC) outperforming, JPMorgan (JPM) said in a research report last week.
The bank notes that bitcoin, the largest cryptocurrency by market cap, gained at the same time as gold because both are viewed as hedges to a “catastrophic scenario.”
Recent problems in the banking sector also “exposed the weaknesses of the traditional financial system given bank’s maturity mismatch is susceptible to bank runs,” analysts led by Nikolaos Panigirtzoglou wrote.
“The U.S. banking crisis and the intense shift in U.S. bank deposits to U.S. money market funds is viewed by crypto supporters as a vindication of the crypto ecosystem,” the report said.
Bitcoin has also benefited from the launch two months ago of Bitcoin Ordinals, which some argue will drive up transaction fees and increase miners’s revenues, the note said.
JPMorgan says the most important support for bitcoin has come from rising investor focus about next year’s halving event, scheduled for April 2024, when mining rewards are cut in half.
This would mechanically double bitcoin’s production cost to around $40,000, creating a positive psychological effect,” because historically, BTC’s production cost has acted as an effective lower boundary to its price, the report added.
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