The now infamous Bank of America research note attacking bitcoin also includes research showing that it would only take $93 million to increase the price of bitcoin by one percent.
Bitcoin is extremely sensitive to increased demand for dollars, according to a note from Bank of America strategist Francisco Blanch, which also includes Philip Middleton and Savita Subramanian.
The analysis showed that inflows of at least $2 billion would be needed to increase the gold price by one percent.
We estimate that a net inflow of bitcoins of just $93 million will result in 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.
Knowing that 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 per dollar as gold, even though the asset has been around for nearly a decade.
Researchers at Bank of America attribute the low cost needed to drive up the price of bitcoin to a large accumulation of whales, leaving fewer coins available to buy on exchanges. Looking at the detailed records on the blockchain, we found that the most important addresses have not been sold in total since the beginning of the pandemic, 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 outstanding supply available for trading on exchanges.
As the number of new businesses on the Bitcoin network reaches unprecedented heights, more and more investors are vying for the shrinking pool of BTC, leading to spikes in demand that easily drive up prices.
Earlier this month, Glassnode estimated that 95% of recently traded BTC migrated down the chain in the last three months, which is another indication that whales are storing their coins for the long haul. The company’s co-founders, Ian and Jan, tweeted:
Despite recent volatility, #Bitcoin supply continues to dry up at a surprising 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 case of BTC Glassnode, the report was extremely negative about bitcoin in general – it denounced the crypto asset for its volatility, pollution, and lack of practicality as a payment method.
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