How much will Bitcoin rise under the 1.9 trillion fiscal stimulus?

Strategists at Bank of America Corp. believe that the price of Bitcoin may be more affected by capital inflows than some other assets. The bank’s strategist said in a report on Wednesday: “We estimate that as long as the net inflow of funds into Bitcoin is US$93 million, the price of Bitcoin will rise by 1%, and the figure for 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 more than 20 years shows that billions of dollars in capital flows have no significant impact on prices, indicating that the US Treasury bond market is larger and more stable.” JP Morgan Chase Strategists 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, institutions have entered this field, and prices are rising. Some people believe that Bitcoin is an attractive digital alternative to gold, or because of its limited supply, it may become a refuge from inflation. Nevertheless, some people think that this is a speculative bubble, and they are worried about issues such as energy consumption and actual value. Bank of America pointed out that because approximately 95% of bitcoins are owned by 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, senior Asia Pacific market strategist at Oanda, said on Thursday: “Bitcoin’s price trend is largely determined by market speculative sentiment, but the large and 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 holder is still long bitcoin. Bank of America pointed out that many so-called “whales” or institutional account holders are actually 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: All in all, 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 a check for Biden’s $1.9 trillion stimulus bill this week, and the Fed’s dovish stance to drive market optimism, the pool of funds 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 $100,000. It is even expected to reach a high of $288,000.”