“If miners provide a steady source of supply and demand does not grow, we have a Bitcoin surplus and the consequence is that the Bitcoin price is pushed down.”
Traders are also pushing down the Bitcoin price.
Analysis points to the increased complexity and costs involved in mining as a driver of growth in Bitcoin supply.
Gold Light BeamsAs mining costs rise, miners are forced to sell the newly mined Bitcoins directly to cover their investments. The Citi says there are an estimated 3,500 BTC mined per day.
“If the miners provide a steady source of supply and demand does not grow, we have a Bitcoin surplus and the consequence is that the Bitcoin price is pushed down.
Traders also push the Bitcoin secret
Citi also concludes that the large Bitcoin secret companies are simultaneously exerting pressure on the price. The decision of Dell or Expedia to accept the Bitcoin secret for laptops or hotel bookings in the future was largely welcomed with great enthusiasm. However, it should not be forgotten that the companies directly convert every Bitcoin they earn into Fiat currency (USD) and thus exert even more sales pressure on Bitcoin.
“It would be a mistake for companies to accept and hold Bitcoin,” the Citi said.
In addition, the accounting rules for large companies, even if they wanted to, would make it impossible for them to hold Bitcoin at present, Citi said.
Due to Generally Accepted Accounting Principles (GAAP), companies cannot use Bitcoin inventories as a hedge against currency risks due to the volatile nature of the digital currency. They would have to identify Bitcoin inventories as speculative assets, which in turn would have a negative impact on the company’s risk profile.
In other words, large companies can accept the Bitcoin, not be used to increase Bitcoin demand.
The increasing supply by companies accepting Miner and Bitcoin would theoretically have to be absorbed by an increasing consumer demand. Unfortunately, this is not the case at the moment, according to Citi.
According to the bank, the great benefits Bitcoin offers have not yet reached the people on the street. That’s why only a very small group of people prefer to pay with Bitcoin than with the world-famous credit card. The general public is not yet aware of the more advantageous Bitcoin method.
The Bitcoin demand is currently maintained by users who prefer to pay for love rather than money with Bitcoin. However, evidence from the market shows that there is not enough love to keep the Bitcoin price from falling:
“Users who pay with Bitcoin do it for love, not money. And the transaction profile also shows that love alone is not enough.”
Other market observers also say that the Bitcoin offer from miners and large companies can contribute to a weak Bitcoin price. Mark Lamb, Managing Director of Coinfloor, the English Bitcoin exchange, confirmed that sales pressure from miners and large companies has intensified in recent months.
“Last year the miners sold a much smaller percentage of their mined Bitcoin. Today we are already assuming that on average they sell 70-90% directly. In addition, there are the companies that usually exchange their Bitcoins directly in Fiat currency and thus generate more print.”