The now infamous Bank of America research note hitting Bitcoin also contains research suggesting that it only takes $ 93 million in inflows to move Bitcoin’s price up one percent.
“Bitcoin is extremely sensitive to rising dollar demand,” the letter was written by Bank of America strategist Francisco Blanch, with contributions from Philip Middleton and Savita Subramanian.
The analysis found that the inflow of at least $ 2 billion would be needed to move the price of gold by a single percentile, while more than $ 2.25 billion would be needed to get the same price impact on 20-year plus treasury bonds. to practice.
“We estimate a net inflow into Bitcoin of just $ 93 million will result in a price increase of 1%,” the report concluded, adding:
‘What has created the enormous upside pressure on Bitcoin prices in recent years and especially in 2020? The simple answer: modest capital inflows. ”
With Bitcoin’s nearly $ 1.1 billion market capitalization equivalent to about 10% of gold, research suggests that Bitcoin is twice as volatile as the inflow of gold per dollar, despite the asset lasting nearly a dozen years.
The Bank of America researchers attribute the low cost needed to shift the price of Bitcoin to heavy accumulation of whales, reducing the amount of coins available to buy on wallets. “If we look at detailed blockchain records, we find that the largest addresses since the start of the pandemic have not been sold in total,” they said.
The Bank of America’s claims are broadly in line with the findings of crypto-analytics firm Glassnode, which estimates that 78% of Bitcoin’s supply was illiquid as of December 2020, and only 20% of the circulating stock available for trading on exchanges .
With the number of new entities active in the Bitcoin network, it is rising unprecedented an increasing number of investors are competing for a declining pool of BTC, which is causing demand rises to rise prices with ease.
Earlier this month, Glassnode estimated that 95% of the BTC last traded in the past three months has moved in the chain, further proving that whales are pushing their coins away in the long run. The co-founders of the firm, “Jan & Yann,” tweeted:
Despite recent volatility, # Bitcoin the supply is still drying up at an astonishing rate for this time in the cycle. https://t.co/yslda1jUha pic.twitter.com/y1SInrBjEF
– Jan & Yann (@Negentropic_) 16 March 2021
Despite the fact that Bank of America appears to be supporting the BTC bubble case of Glassnode, the report took an extremely negative tone with respect to Bitcoin in general, which slammed the crypto-asset because it was volatile, polluting and was an ‘impractical’ means of payment.