Bitcoin may be primed for a $120,000 valuation by the end of 2024, as miners reduce sales of the top cryptocurrency, according to Standard Chartered analyst Geoff Kendrick.
In April, he predicted bitcoin could reach $100,000 by next year, but now thinks that could be too conservative when accounting for miner profitability.
“We reiterate our end-2024 BTC price target of around $100,000, with potential upside from reduced miner selling,” he wrote in a note on Monday.
In a follow-up email to Insider, Kendrick said a price of $120,000 is valid, representing nearly 300% upside from current levels. He also expects bitcoin to jump 67% this year to $50,000.
His more bullish stance is due to increased mining profitability, which means miners can sell fewer tokens to maintain the same amount of cash flow. That reduces bitcoin supply and pushes prices higher, he said.
Kendrick estimated that just under 100% of all bitcoin mined was sold in the second quarter, but he expects miners will start to sell fewer over time. Historically, this occurs when bitcoin’s price exceeds the average all-in cash cost of mining, as is happening
“If the BTC price averages $50,000 by Q1-2024, as we predict, the ‘BTC minus all cash costs’ calculation would rise to $30,000,” he wrote. “On that basis, selling just 27% of BTC mined in Q1-2024 would generate the same absolute level of excess cash as selling 100% in Q2-2023.”
Effectively, this would be enough to reduce the net supply of bitcoin by around 250,000. Not only could this pressure prices, but would have an effect on the currency’s inflation rate, moving it down from 1.7% to 0.4% year-to-year.
In recent weeks, bitcoin has returned above $30,000, after a few Wall Street giants showed interest in creating their own bitcoin ETFs. This has manifested other bullish calls for the crypto token, with Fundstrat’s Tom Lee recently predicting a $200,000 valuation over the coming years.
Mining profitability has been climbing as the cost to produce new bitcoin falls. That’s as large-scale miners, such as Riot and Core Scientific, have clamped down on corporate costs, while energy prices have also declined.
Meanwhile, halving events — in which the amount of bitcoin produced by mining is halved, with the next one coming in April or May of 2024 — tend to cause industry consolidation, which further reduces mining expenditures.