Bank of America has once again proved that "simplicity is genius". The world's largest bank explained why it had invested in cryptocurrency.
Its argument is as simple and logical as the current situation in the crypto market. Meanwhile, many experts have reached a dead end in their attempts to seek a convincing explanation for a surge in demand for crypto assets.
"The main portfolio argument for holding bitcoin is not diversification, stable returns, or inflation protection, but rather sheer price appreciation," Bank of America said.
The report provided by the bank claims that bitcoin "is not tied to inflation, and remains exceptionally volatile, making it impractical as a store of wealth or payments mechanism". In turn, an increase in bitcoin's price is a "factor that depends on bitcoin demand outpacing supply".
According to the bank, there is no point in delving deep into the nature of price movements in the crypto market. Experts recommend traders seize the moment while bitcoin is breaking records. The supply of bitcoin is limited due to the so-called "halving" that happens roughly every four years, experts noted. This factor boosts demand that, in turn, drives the price to new highs.
The only problem is that bitcoin holdings are currently heavily concentrated. Over 95% of the total mined coins are controlled by only 2.4% of addresses. This means that the currency is extremely sensitive to price fluctuations in case of account activity. In the meantime, market participants can enjoy the cryptocurrency's strong price appreciation until bitcoin whales join the battle.
