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According to the report by the Bank of America, Bitcoin is expensive to mine, it offers a low throughput in comparison to Visa, and is very volatile to be used as a store of value.
New research by strategist at the Bank of America, Francisco Blanch, featuring contributions from Philip Middleton and Savita Subramanian, suggests that it takes $93 million inflows to move Bitcoin price by 1% at current levels of $59.
“We estimate a net inflow into Bitcoin of just $93 million would result in the price appreciation of 1%,” the report noted. Elsewhere, the report noted that it could take at least $2 billion worth of inflows to move gold price by 1%. On the other hand, it could take over $2.5 billion inflows to move 20-year-plus treasury bonds by a similar percentage.
Bitcoin Market Outlook in Relation to the Report by Bank of America
The research by the Bank of America’s strategists was not friendly with Bitcoin and its operations. According to the report by the Bank of America, Bitcoin is expensive to mine, offers a low throughput in comparison to Visa, and very volatile to be used as a store of value.
“Bitcoin has also become correlated to risk assets, it is not tied to inflation, and remains exceptionally volatile, making it impractical as a store of wealth or payments mechanism,” the report indicated.
The report there suggested that the main reason for holding Bitcoin is the sheer aspect of price appreciation that is fueled by high demand amid low supply. Bitcoin has a maximum supply of 21 million out of which it is estimated that 88% has already been mined, thus approximately 18.6 million units of Bitcoins are already in circulating supply.
However, a new report by on-chain data analysis firm Glassnode suggests that currently 14.5 million BTC (78% of the circulating Bitcoin supply) is held by illiquid entities. Putting into perspective that some Bitcoins units might be lost forever due to lost keys or forgotten passwords, Glassnode further suggested that the figure might be lower than estimated.
The report by Bank of America highlighted that the exponential growth in Bitcoin price has been bolstered by low selling pressure from Bitcoin ‘whales’. Looking at detailed blockchain records, we find that the largest addresses have not been selling in aggregate since the pandemic began,” the report indicated.
Bitcoin has a market capitalization of approximately $1.09 trillion, approximately 10X less than Gold. As more institutional investors continue to stack the asset as indicated by a study on large addresses, more inflows are expected into the crypto industry. However, with time it is estimated that more cash inflow will be required in the future to move Bitcoin price by 1%.