Can you manipulate the Bitcoin (CRYPTO:BTC) price?

We all know small-cap ASX share prices can be impacted by larger investors. But can you manipulate the price of Bitcoin?

Bernd Struben

Author bio Bernd Struben earned his BA in economics from the University of Michigan in 1991, with post-graduate studies in environmental economics at the University of Connecticut. Over the years he’s written about and analysed the tourism industry in the Caribbean; Europe’s commercial real estate markets; and, since moving to Australia in 2010, global and Aussie share markets. Bernd studies geopolitical and macroeconomic trends, alongside sector and company specific data, to gauge what he believes could be tomorrow's best investments. In his free time, you might find Bernd at the beach with his family or working on his next science fiction novel. Areas of expertise Australian and global share markets Macroeconomic and geopolitical trends Real estate Education Economics, University of Michigan Favorite investment quote "The four most dangerous words in investing are: 'This time it's different." — Sir John Templeton

Published March 19, 2021 3:52 pm AEDT

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.

Rising bitcoin price represented by man blosing up baloon with bitcoin symbol on it — Image source: Getty Images

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.

Foolish takeaway

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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