Bitcoin miners are creating a virtuous circle that could propel the token’s price beyond already-bullish forecasts, Standard Chartered analyst Geoff Kendrick told Insider.
That’s as miners often sell fewer tokens when the price climbs, a bullish tendency that led him say earlier this month that $120,000 is possible next year, representing 300% upside from current levels.
In a follow-up interview, Insider asked Kendrick: if higher prices cause miners to sell fewer tokens, further boosting prices, then would even higher prices fuel a positive-feedback loop that takes bitcoin past $120,000?
Yes.
“And so your point about this becoming self-fulfilling, I suspect is actually a very important driver,” he said.
Miners predominantly sell bitcoin to cover costs. But as the price rises and previous debt struggles in the industry ebb away, miners are letting go of less bitcoin.
Another tailwind is the coin’s upcoming halving in 2024, which is when the reward given to miners is cut in half. This is to cap the supply of bitcoins, and has historically led to price increases.
“Then if you add in some of the other things, like getting close to the halving cycle, et cetera, then that sort of adds,” Kendrick said. “And then yeah, the cycle in theory just keeps going.”
Miners also have little reason outside of bitcoin’s price moves to sell the token, he said. Some of this is on account of the culture surrounding the industry, with many miners holding on in the anticipation that bitcoin eventually reaches stellar highs.
“So they basically want to have a company that starts out when prices are cheap, get cheaper electricity and stuff, and then hold on. It’s like a super-leveraged play,” he said.
Kendrick has been bullish on bitcoin this year, and in April he said it would hit $100,000 in 2024, citing a number of other factors beyond miner profitability. Examples included bitcoin’s safe-haven reputation, regulatory adaptations, institutional interest, alternative currency fall-off, and less volatility.
Now, he told Insider that a few of these factors also suggest more upside.
For instance, BlackRock’s interest in creating a bitcoin spot ETF signals growing demand from the investment firm’s clients, while the Federal Reserve’s expected end on its rate-hiking cycle would marginally help bitcoin.
The one factor that Kendrick would reassess was his idea that bitcoin would gain from disinvestment in other crypto, or so-called altcoins.
For this, he noted the recent courtroom victory of Ripple over the Securities and Exchange Commission, which sued the firm in 2020 over its cryptocurrency XRP.
However, a judge recently ruled in favor of Ripple, saying XRP is not a security, meaning it’s outside the SEC’s regulatory reach. The news sparked a rally in altcoins.
“So the assumption is, well, if Ripple is not [a security], then these are also not,” he said. “So that’s why you had big bounces in like Solana, as an example.”
How long this tailwind for altcoins will last is uncertain, Kendrick said, adding that any institutional success in establishing bitcoin ETFs would prompt a renewed focus on apex tokens.
