(CTN News) – When it comes to determining the price of Bitcoin (CRYPTO: BTC), the law of supply and demand plays a significant role.
Considering that there is a limited quantity of the cryptocurrency, the price of the cryptocurrency will increase as demand continues to grow. And it’s possible that a significant new buyer is driving up demand.
In his letter to shareholders for the first quarter, Jack Dorsey, CEO of the financial technology company Block (NYSE: SQ), provided an exclusive discussion on Bitcoin.
As part of his remarks, he noted that Block has committed to purchasing as an investment on a monthly basis using ten percent of the gross income it generates from its many businesses that are tied to Bitcoin activities.
According to the updated strategy, Block’s gross profit for the first quarter was $80 million,
Which indicates that $8 million will be invested in Bitcoin through the implementation of the strategy.
As a matter of fact, that number is higher: For the first time, it made a monthly purchase of $4.4 million in the month of April.
Even though that is a significant investment, the market capitalization of Bitcoin, which is now at one trillion dollars, will not be significantly impacted.
However, Dorsey is encouraging other businesses to follow his example, and one of the initiatives that he is promoting is a program that enables Square merchants to automatically invest 10% of their total earnings in Bitcoin.
This could result in a significant surge in demand.
Dorsey’s model is straightforward and easy to follow.
Through the process of “open sourcing” Block’s investment plan, Dorsey was able to convince other ambitious businesspeople to make substantial investments in Bitcoin.
He calls it the Corporate Balance Sheet Bitcoin Blueprint. He mentions it frequently. Because the idea is not unduly complicated, numerous others are able to easily replicate it.
The primary objective of the program is to make regular purchases of using ten percent of Block’s monthly gross profit coming from the sale of Bitcoin-related items. One sort of dollar-cost averaging is described here.
This type of averaging often involves making progressive investments in a securities that are equal in dollar amount. When an asset is purchased on a consistent way over a period of time, the average cost per unit is more evenly distributed. With a decrease in price, you will buy more units, but with an increase in price, you will buy fewer units. For the purpose of accumulating a volatile asset such, that could prove to be a very effective method.
By utilizing dollar-cost averaging, one can circumvent a significant number of the challenges that are associated with investing in Bitcoin. “the price of bitcoin can be highly volatile and difficult to predict as its price action does not always correlate with existing asset classes,” Dorsey wrote in the blueprint for his plan.
“[T]he coin’s price action does not always correlate with existing asset classes.” “We believe this approach enables us to optimize our long-term investment position while minimizing the price risks associated with attempting to aggregate less frequent, larger purchases.”
As a result of the very substantial nature of Block’s acquisitions, the company will carry out deals on a monthly basis during a two-hour window in which liquidity is abundant.
It makes use of a one-of-a-kind order type that is referred to as a time-weighted average price (TWAP), which is designed to have the least amount of an impact on the price of the market.
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