How Much Money Does it Take to Manipulate The Bitcoin Price 1%? How Thin Liquidity Is Exploited. Photo Credit: Bangkok, Thailand - 1 July 2021: Cryptocurrency on Binance trading app, Bitcoin BTC with altcoin digital coin crypto currency, BNB, Ethereum, Dogecoin, Cardano, defi p2p decentralized fintech market
It takes inflows of only $93 million to move the Bitcoin price by one percent, according to the Bank of America.
Bitcoin is twice as volatile as gold per dollar in-flows despite the asset existing for nearly a dozen years, with Bitcoin’s nearly $ 1.1 trillion market cap equating to roughly 10 percent of golds.
It would take at least $2 billion worth of inflows to move the price of gold by one percent, and more than $2.25 billion would be needed to exert the same price impact on 20-year-plus treasury bonds, according to the analysis authored by Bank of America strategist Francisco Blanch, with contributions from Philip Middleton and Savita Subramanian.
The high volatility of cryptos is caused by market manipulation, according to David Gerard, the author of the book “Attack of the 50 Foot Blockchain.”
The Bitcoin price is highly manipulated because this is an unregulated pool for sharks, and this kind of manipulation and fake liquidity happens all the time, according to Gerard.
When fake liquidity is deployed, the price is pumped up, and this is the sort of manipulation that goes on in the Bitcoin markets all the time.
Liquidity is a subjective term, meaning an investor’s ability to move a reasonable volume of an asset, without an undue price shift. It is related to market depth, measured by the worst price an order will hit at a certain size limit.
“We estimate a net inflow into Bitcoin of just $93 million would result in price appreciation of one percent. What has created the enormous upside pressure on Bitcoin prices in recent years and, particularly, in 2020? The simple answer: modest capital inflows,” read the report by Blanch.
Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin
Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?
After investing in cryptocurrencies, investors encounter large trades taking place on the exchanges with “thin books” where a large volume of cryptocurrencies are executed in the exchanges with low liquidity.
The manipulators take advantage of the thin order book by selling volumes of assets on the spot market, causing them to rap quick profits.
In leveraged markets, huge losses for some investors mean profits for others. The impact of cryptocurrency been continuously manipulated indicates that some investors become liquidated and suffer huge losses because of margin calls when the price manipulation influences the price.
The liquidity problem is one of many factors that lead to sudden movements in the Bitcoin price, therefore improved liquidity can help reduce the risks of bitcoin.
