Investments of one size have a more noticeable impact on the price of Bitcoin than on the prices of other assets. Analysts of Bank of America write about it in a new report.
“Bitcoin is extremely sensitive to rising dollar demand. We estimate that a net inflow of just $ 93 million will drive the price of bitcoin up 1%, while achieving the same effect in the gold market would require $ 2 billion, or 20 times more. For comparison, the same analysis of Treasury bonds for 20+ years shows that multibillion-dollar cash inflows do not have a significant impact on the price, confirming the much higher stability of the US government bond markets, ”the document says.
For the rest of the report, the authors continue to criticize Bitcoin for the most part. Thus, they state that 95% of all cryptocurrency coins are concentrated in 2.4% of the largest addresses, so it is “impractical as a payment mechanism or even as an investment tool, and can also create problems of a public or managerial nature.”
“While speculative sentiment is driving the main movements in Bitcoin, large and sharp jumps up or down can be attributed to a lack of two-way liquidity at a particular point in time,” the analysts add.
As a likely factor in the rise in the price of bitcoin, they point to the preservation of positions by the largest holders of the cryptocurrency:
“Detailed blockchain entries indicate that the largest addresses have not generally sold since the start of the pandemic.”
In this regard, the determining factor in the behavior of the price of bitcoin is the inflow of funds into its market, analysts conclude.
“What has created the extreme upward pressure on the price of Bitcoin in recent years, especially in 2020? The answer is simple: moderate capital inflows. ”
To top it off, they state that there is no compelling reason for investors to keep bitcoin “unless they see it going up.”
“Bitcoin has become correlated with risky assets, it is not tied to inflation and remains extremely volatile. Thus, the main argument for including bitcoin in the portfolio is not diversification, stable income or inflation protection, but a simple increase in value; a factor depending on whether the demand for bitcoin will outstrip the supply, ”they add.