Bank of America’s now infamous study on bitcoin attacks also includes a study showing that it would only take $93 million to cause the price of bitcoin to rise by one percent.
Bitcoin is extremely sensitive to rising demand for dollars, according to a note from Bank of America strategist Francisco Blanche, which also features Philip Middleton and Savita Subramanian.
The analysis showed that inflows of at least $2 billion would be needed to increase the gold price by 1%.
We estimate that a net inflow of just $93 million in bitcoins will lead to a 1% price increase, the report said:
What has put enormous pressure on bitcoin prices in recent years and especially in 2020? The answer is simple: a modest inflow of capital.
Since bitcoin has a market capitalization of nearly $1.1 trillion, which is about 10% of gold, the study shows that bitcoin is twice as volatile against the dollar as gold, even though the asset has been around for nearly a decade.
Researchers at Bank of America attribute the low value needed for bitcoin’s price to rise to a large backlog of whales, which means fewer coins are available for purchase on exchanges. After examining the detailed records on the blockchain, we found that key addresses have not been sold in their entirety since the pandemic began, they explained.
Bank of America’s claims are largely consistent with data from cryptocurrency analysis firm Glassnode, which estimated that 78% of bitcoin supply was illiquid as of December 2020, leaving only 20% of the remaining supply available for trading on exchanges.
As the number of new businesses on the Bitcoin network reaches unprecedented levels, more and more investors are vying for the shrinking pool of BTC, causing spikes in demand that easily drive up prices.
Earlier this month, Glassnode estimated that 95% of recently sold BTC have migrated downwards in the last three months, further evidence that the whales are keeping their coins at bay. The company’s co-founders, Ian and Jen, tweeted:
Despite recent volatility, #Bitcoin supply continues to dry up at an amazing rate for this time of the cycle. https://t.co/yslda1jUha pic.twitter.com/y1SInrBjEF
– Jan and Jan (@Negentropic_) 16. March 2021
While Bank of America’s findings seem to favor the bullish example of BTC Glassnode, the report was extremely negative about bitcoin in general – it condemned the crypto asset for its volatility, pollution, and lack of practicality as a payment method.
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