90 million = up 1%! How much will Bitcoin rise under the 1.9 trillion stimulus plan?
Strategists at Bank of America believe that the price of Bitcoin may be affected by capital inflows than some other assets. The bank’s strategists stated in a report on Wednesday: “We estimate that if the net inflow of funds into Bitcoin is US$93 million, the price of Bitcoin will appreciate by 1%, and gold will be close to US$2 billion. It is even 20 times higher. In contrast, the same analysis of Treasury bonds with maturities of 20 years or more shows that billions of dollars in capital flows have no significant impact on prices, which indicates that the US Treasury bond market is more stable.” Strategists from JP Morgan Chase pointed out that in dollar terms, institutional funds flowing into Bitcoin in this quarter increased by 20% compared to the previous quarter, while retail funds flowing into Bitcoin increased by 90%.
With the development of robust product and derivatives markets, the credibility of cryptocurrency as an asset class is rising. While institutions have entered this field, and the prices are rising, some believe that Bitcoin is an attractive digital alternative to gold, or due to its limited supply, it may become a refuge from inflation. Nevertheless, some people think it is a speculative bubble and are worried about issues such as energy consumption and actual value. Bank of America pointed out that approximately 95% of bitcoins are owned by the 2.4% of addresses with the highest balances, “it is impractical to use them as a payment mechanism or even as an investment tool.”
As an asset with still large volatility and low liquidity, the price trend of Bitcoin may only depend on current market conditions. Jeffrey Halley, the senior Asia Pacific market strategist at Oanda, said on Thursday: “Bitcoin’s price trend is largely determined by market speculative sentiment, but the rapid ups and downs also show the lack of two-way liquidity in the market. .”
Bank of America believes that another factor that may push up the price of bitcoin is that the largest holders are still longing bitcoin. Bank of America pointed out that many so-called “whales” or institutional holders are buying bitcoins rather than selling them. They said: “Looking at the detailed blockchain records, we found that the largest address has not been sold since the beginning of the epidemic.” Bank of America analysts said: In recent years, especially since 2020, the price of Bitcoin has been pushed up. The most important factor is the inflow of capital.
With the issuance of Biden’s $1.9 trillion relief bill this week, and the Fed’s dovish stance to drive the market optimism, the capital pool in the Bitcoin market is expected to further expand. The founder of Plan B said: “There are more factors supporting the continuation of the current bull market. I believe that cryptocurrencies will exceed US$100,000, or even reach a high of US$288,000.”
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