The research report has assessed that it would require a minimum of $2 billion worth inflows to push the price of gold by 1%, while over $2.25 billion would be required to create a similar price effect on 20-year plus treasury bonds.
The report concluded, stating:
“We estimate a net inflow into Bitcoin of just $93 million would result in price appreciation of 1%. What has created the enormous upside pressure on Bitcoin prices in recent years and, particularly, in 2020? The simple answer: modest capital inflows.”
While Bitcoin’s almost $1.10 trillion market cap is only about 10% of gold, the numero uno crypto is twice volatile as the yellow metal per-dollar in-flows in spite of the asset being in existence for almost twelve years. The Bank of America’s argument stems from the fact that whales have accumulated in huge quantities causing liquidity issues on cryptocurrency exchanges. The document read “Looking at detailed blockchain records, we find that the largest addresses have not been selling in aggregate since the pandemic began.”
Bank of America’s emphasis seems to be broadly in accordance with studies made by cryptocurrency analytics firm Glassnode, which assessed that 78% of Bitcoin’s prevailing supply is illiquid as of December 2020, allowing only 20% of circulating supply for trading on cryptocurrency exchanges.
With the count of new firms that are active on Bitcoin network surging to extraordinary levels, a growing number of investors are contesting for a declining pool of Bitcoin, causing sharp price rallies without much resistance.
The number of new participants in the #Bitcoin network is unprecedented.
Over the past weeks, we have seen a large growth of new entities. This is a strong indication that new retail investors have been entering the space.
Chart: https://t.co/3w1LwtUFZV pic.twitter.com/MXNXwimnfZ
— glassnode (@glassnode) March 15, 2021
Earlier in March, Glassnode had assessed that 95% of Bitcoin was transacted on-chain in the past three months, additionally proving that whales are transferring their cryptos with a plan to hold on for a long-term. Glassnode founders “Jan & Yann,” tweeted:
Despite recent volatility, #Bitcoin supply is still drying up at astonishing rates for this time around in the cycle. https://t.co/yslda1jUha pic.twitter.com/y1SInrBjEF
— Jan & Yann (@Negentropic_) March 16, 2021
In spite of Bank of America’s assessment backing Glassnode’s Bitcoin bull rally, the document echoed a negative view of Bitcoin as a whole. The report snubbed the cryptocurrency for its volatility and allegedly “impractical” mode of payment.