According to Standard Chartered analyst Geoff Kendrick, Bitcoin could experience a surge of up to 300%, reaching a valuation of $120,000 by the end of 2024. Kendrick’s previous prediction in April was that Bitcoin would reach $100,000 by next year, but he now believes this estimate may be too conservative, taking into account the impact of miner profitability.
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Kendrick attributes his more bullish stance to increased mining profitability. As miners find it more profitable to hold onto their Bitcoin rather than sell it immediately, the reduced supply of Bitcoin in the market can push prices higher. Kendrick estimates that in the second quarter, nearly 100% of all mined Bitcoin was sold, but he expects miners to gradually reduce their sales over time.
To illustrate this point, Kendrick explains that when Bitcoin’s price surpasses the average all-in cash cost of mining, miners tend to sell fewer tokens. If the average BTC price in the first quarter of 2024 reaches $50,000 as predicted, the calculation of “BTC minus all cash costs” would rise to $30,000. Consequently, selling only 27% of the Bitcoin mined in Q1-2024 would generate the same excess cash as selling 100% in Q2-2023.
Reduced miner selling not only affects prices but also impacts the inflation rate of Bitcoin. By reducing the net supply of Bitcoin by approximately 250,000, the inflation rate could decrease from 1.7% to 0.4% year-over-year.
The recent increase in Bitcoin’s price, with it surpassing $30,000, has been attributed to interest from Wall Street giants in creating Bitcoin exchange-traded funds (ETFs). This has led to other bullish predictions for the cryptocurrency, such as Fundstrat’s Tom Lee forecasting a valuation of $200,000 in the coming years.
The profitability of mining has been rising as the cost to produce new Bitcoin decreases. Large-scale miners, including Riot and Core Scientific, have been cutting corporate costs, while energy prices have also declined. Additionally, halving events, which occur when the amount of Bitcoin produced by mining is halved, tend to lead to industry consolidation and further reduction in mining expenditures. The next halving event is expected to take place in April or May of 2024.
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Why is it relevant for investment funds in Latin America?
- If Bitcoin reaches the predicted levels, it is likely to attract the attention of investors and adopters in Latin America. This could increase interest in Bitcoin mining and cryptocurrency trading in the region.
- Latin America is a region with a growing adoption of technology. This provides a vast market for venture-backed startups, either locally or as an entry point to other markets in Latin America.
- The region has shown a growing interest in cryptocurrencies, particularly due to factors such as the volatility of local currencies, limited access to traditional financial services, and the opportunity for more efficient and cost-effective international transactions.
To read the information in detail, visit: Reuters