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Bitcoin, the leading cryptocurrency, may see a surge in value and reach $120,000 by the conclusion of 2024. This prediction comes from Geoff Kendrick, an analyst at Standard Chartered, who believes that reduced miner sales will contribute to this upward trajectory.
Kendrick had previously projected a price of $100,000 for bitcoin by next year, but he now considers this estimate too conservative due to the profitability of miners. In a note released on Monday, he restated his end-2024 BTC price target of approximately $100,000, acknowledging the potential for further gains resulting from decreased miner selling.
Kendrick expressed confidence in the validity of a $120,000 price point, representing a remarkable 300% increase from current levels. He also anticipates a 67% surge in bitcoin value this year, bringing it to $50,000.
The analyst’s more bullish stance stems from improved mining profitability. As miners generate more profits, they can afford to sell fewer tokens while maintaining the same cash flow. This reduction in bitcoin supply naturally drives prices higher.
Kendrick estimated that during the second quarter, nearly 100% of all mined bitcoins were sold. However, he expects miners to decrease their sales over time. This trend typically emerges when the price of bitcoin surpasses the average cost of mining, known as the all-in cash cost.
“If the average BTC price reaches $50,000 by Q1-2024, as we anticipate, the ‘BTC minus all cash costs’ calculation would rise to $30,000,” Kendrick explained. “Based on this, selling only 27% of the bitcoins mined in Q1-2024 would generate an equivalent excess cash level compared to selling 100% in Q2-2023.”
Consequently, this reduction in sales would decrease the net supply of bitcoin by approximately 250,000. Beyond impacting prices, it would also lead to a lower inflation rate for the cryptocurrency, decreasing it from 1.7% to 0.4% on a year-to-year basis.
In recent weeks, bitcoin has experienced a resurgence, surpassing the $30,000 mark. This increase follows interest from major Wall Street players looking to establish their own bitcoin exchange-traded funds (ETFs). Such developments have sparked further optimism for the digital currency, with Tom Lee of Fundstrat recently predicting a valuation of $200,000 in the coming years.
Mining profitability has been on the rise as the cost of producing new bitcoins declines. Large-scale miners, including Riot and Core Scientific, have focused on reducing corporate expenses, and energy prices have also decreased. Furthermore, the upcoming halving event, scheduled for April or May 2024, is expected to trigger industry consolidation, further reducing mining costs.