We all know small-cap ASX share prices can be impacted by larger investors. But can you manipulate the price of Bitcoin?
The post Can you manipulate the Bitcoin (CRYPTO:BTC) price? appeared first on The Motley Fool Australia. –
The Bitcoin (CRYPTO: BTC) price is down 4.1% in the last 24 hours. You can currently buy one Bitcoin for US$56,577 (AU$73,477).
According to data from CoinDesk, that gives Bitcoin a market capitalisation of US$1.06 trillion. For an idea of the digital coin’s volatility, when I penned an article on Bitcoin exchange-traded funds (ETFs) yesterday, Bitcoin had a market cap of US$1.1 trillion.
But you’re likely reading this article to find if you can manipulate the Bitcoin price. And the answer appears to be yes. By as much as 1%… if you have $93 million.
How much does it take to move the Bitcoin price?
When Elon Musk’s Tesla Inc (NASDAQ: TSLA) invested US$1.5 billion into Bitcoin on 8 February this year, the Bitcoin price was US$38,462. (Note, that’s not necessarily the price Tesla paid.) By 22 February it was trading for US$57,129.
Now, not all of the 48% price gains over those two weeks were driven by the extra money pouring in from Tesla. The news of Elon Musk’s thumbs up for the digital tokens itself saw more retail and institutional investors take note of Bitcoin and likely decide to buy some for themselves.
But according to strategists at Bank of America Corp (NYSE: BAC), the Bitcoin price moves much more quickly on increased demand than defensive assets such as government bonds.
Here’s what they wrote in a note (excerpt from Bloomberg):
Bitcoin is extremely sensitive to increased dollar demand. We estimate a net inflow into Bitcoin of just $93 million would result in price appreciation of 1%, while the similar figure for gold would be closer to $2 billion or 20 times higher. In contrast, the same analysis for the 20-year-plus Treasuries shows that multibillion money flows do not have a significant impact on price, pointing to the much larger and stable nature of the U.S. Treasuries markets.
It’s unlikely you’ll find individual investors pouring US$93 million into Bitcoin to enjoy a 1% price gain. But if the analysts at Bank of America have this right, it does show that the world’s biggest crypto is likely to remain much more volatile than the likes of gold.
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Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Bitcoin and Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.