How Much New Inflow Bitcoin Needs to Stay at this Price Level?
- For the last 2.5 years, $400 million of new investment each month kept BTC price at $7,000, after halving it would require just $200 million
- With the spread of the coronavirus slowing and volatility coming down, investors looking for the next trade
In yet another green start of the day, Bitcoin jumped 5.16% to trade at $7,148. In the past week, the world’s leading cryptocurrency recorded gains of 12.60%.
Following Bitcoin, altcoins pumped even harder this time, with Stellar (XLM) up 16.60%, ZEC 9.17%, Ethereum 8.94%, IOTA 8.84%, EOS 7.44%, and Monero 7.03%. In total, $12 billion were added to the market cap today.
Bitcoin would need just $200 million a month
In an interesting and uplifting tweet, popular analyst PlanB shared that in order to maintain the price at $7,000 since October 2017, Bitcoin has had about $400 million in new cash inflow every month. Assuming all trading is zero-sum game, for the last 2.5 years, 30d x 24h x 6blocks x 12.5btc x $7k, fresh flow of $400 million investment was made.
After the halving in May that would cut down the bitcoin rewards in half from the current 12.5 BTC to 6.25 coins, we would only need $200 million per month to keep the price at $7,000 level.
If this $400 million per month stays the same, then we would rocket, said PlanB. Although not all of the Bitcoin mined were sold, “if we assume the % sold the same before and after the halving, the logic still stands.”
Also, it may sound simple but doing so is difficult because it means HODLing until next halving and not trading, being scared by the high volatility, and falling prey to altcoins, said the analyst.
But of course, it won’t all stop here, as he noted that in 2012-2016, the inflow was $30M and then throughout 2008-2012 it was $1 million. “So I expect it to increase at least an order of magnitude, say $1B+,” said PlanB.
Investors now looking to hedge inflation
We have been already seeing retail buying the dip and institutions are also jumping in, given the large number of transactions happening on-chain again.
Commentators are also expecting a trillion-dollar stimulus to push the bitcoin prices up. According to Anthony “Pomp” Pompliano “Over the next two years, I think that it will have hundreds of percent of appreciation, given the quantitative easing and the volatility it brings,” and his personal view is of bitcoin hitting $100,000 before December 2021.
Binance CEO, Changpeng “CZ” Zhao is of similar opinion who said QE, depression, and central banks printing money would work in crypto’s favor. Once this money starts flowing in, “most prices are gonna go up very dramatically and I think cryptocurrency will go up much more proportionally higher,” he said.
As we are seeing today, Bitcoin and gold both are looking for a breakout. The precious metal is up sharply at $1,642 per ounce.
“Since the beginning of this crisis cash has been the main benefactor in the markets as investors sold off just about anything with value in order to avoid the rapid sell-offs,” said analyst Mati Greenspan. “Now that the spread of the virus seems to be slowing and volatility is coming down, it's time to look for the next trade.”
While the Fed will be deploying new swap lines, the Japanese government is also out with their stimulus measure of just under $1 trillion, an unprecedented 20% of their GDP. According to Greenspan, investors may have gotten hold of their cash and are likely to be looking to put it back to work. And this time, they are “looking to hedge inflation.”