Large Companies Invest in Bitcoin
Public and private companies as of 12/2/2021 hold about 413.463 Bitcoins which are valued at around 14 Billion U.S. Dollars.
The high demand for Bitcoin that comes from large private and public companies drive the price of Bitcoin higher and reduces its investment risk. Large companies usually have access to larger funds than private individual investors, hence, they are able to increase the demand for Bitcoin at a higher rate than individual private investors.
According to Economics Help, a higher demand for a product or service causes an increase in the price and supply of that product or service. However, I explained in Decentralization that the supply of Bitcoin can not be manipulated unlike centralized investments, cars, houses, fiat currency, etc. in which their supply can be manipulated by an agency controlling it. Since no agency or company is able to control Bitcoin and increase its supply, when Bitcoin experiences a higher demand, its supply does not get increased. Therefore, a higher demand can only affect the price of Bitcoin, and the effects of a higher demand on the price of Bitcoin are amplified since its quantity remains unchanged.
Refer to the figures below to visualize the effects of an increased demand on the price:
These figures were graphed using this tool
Source: Fortune
Figure 1.
Figure 2.
Figure 3.
When large companies with access to a large amount of funds decide to invest in Bitcoin, the demand curve shifts to the right following as can be visualized in (Figure 1.), this causes a shortage in the market. In economics, there are generally three ways of solving market shortages:
To increase the supply. (Figure 2.)
To increase the equilibrium price. (Figure 3.)
To increase the supply and the equilibrium price.
As I pointed it our earlier, since Bitcoin's supply can not be manipulated, the equilibrium price has to increase per (Figure 3.) To solve the market shortage created by an increase in demand as a result of large companies' interest in Bitcoin.
Detailed Analyses:
Bitcoin investments by large companies and corporations creates more trust in the system and adds to people's confidence in Bitcoin. Large corporations usually have financial advisors that study these investments at a professional level and perform multiple level analyses to determine the potential risks and rewards of a certain investment. Therefore, when large corporations invest in Bitcoin, the investment is usually built off of a deep analysis. This motivates more private individual investors to follow the footsteps of the companies and start adopting and investing in Bitcoin.
For example, ARK Invest and Square have published very detailed papers and analyses that justify and explain their thesis behind investing in Bitcoin:
ARKinvest_091729_Whitepaper_Bitcoin_II_An Investment.pdfBCEI_White_Paper.pdf