Bitcoin may hit the $100,000 level by the end of 2024 as “crypto winter” ends, according to a note published by British multinational bank Standard Chartered.
The note highlighted several reasons that could make Bitcoin rally up to 268 percent of its current levels in the coming future. The banking crisis in March is a major contributor to the token’s rally since it allows Bitcoin to re-establish itself as a “decentralized, trustless and scarce digital asset,” according to the bank’s analysts.
The banking crisis started in the U.S. with the failure of two banks, Silicon Valley Bank (SVB) and Signature Bank. Both lenders had significant exposure to crypto, particularly Bitcoin’s key rivals, stablecoins. Macroeconomic factors caused stablecoins to lose their peg to the U.S. dollar.
Analysts noted that when SVB collapsed, some assets that backed stablecoins’ values were held in the bank. USDC, for instance, saw a nearly $13 billion decline in total market valuation after its issuer Circle revealed its exposure to SVB after the bank’s failure.
"Against this backdrop, Bitcoin has benefited from its status as a branded safe haven, a perceived relative store of value and a means of remittance," Geoff Kendrick, Standard Chartered’s head of crypto research and EM FX West, wrote.
With investors moving their funds from stablecoins, Standard Chartered forecasts that Bitcoin’s share of the total crypto market capitalization will increase to the 50 to 60 percent range. Before the SVB collapsed, Bitcoin’s share was around 40 percent.
Standard Chartered’s note also explained that Bitcoin’s recent rebound to above $30,000 showed an improvement in the “structural profitability backdrop” among crypto miners. During the peak of crypto winter last year, miners saw a significant decline in profit margins, which forced them to force their most mined tokens.
"In addition, with energy prices likely having peaked, the structural profitability backdrop for miners should improve, adding further upside."
Geoff Kendrick, Head of Crypto Research and EM FX West at Standard Chartered
Kendrick said even though Bitcoin price had fallen below the $30,000 level, miners would likely keep their tokens instead of selling them to the market because the price range remained well above the average mining cost of $15,000. This situation would further prop up the Bitcoin price.
Analysts said Bitcoin would also trade higher in the future as the Federal Reserve was close to ending its current monetary tightening cycle. Kendrick explained that it was because Bitcoin prices had a positive correlation with the tech-leaning Nasdaq index on Wall Street. A pause in interest rate hikes will improve sentiments on risk-on assets like stocks, which can translate to a Bitcoin rally due to the market correlation.
According to the note, Bitcoin’s halving in 2024 will also promote its rally. Halving is a mechanism where miners will see a 50 percent cut to their reward for mining Bitcoin transactions. This mechanism caps the Bitcoin supply worldwide and has historically caused price increases. Per Bloomberg Intelligence, Bitcoin can hit $50,000 a token by April 2024 due to halving.
Over the past years, Bitcoin proponents have maintained that digital assets are worth investing in during an economic downturn. They said Bitcoin’s limited supply of 21 million tokens meant that its value should appreciate as demand for alternative currencies increased.
Bitcoin may still plunge
At the end of last year, Standard Chartered predicted that Bitcoin could still plunge as low as $5,000 due to “financial-market surprises.”
Standard Chartered global head of research Eric Robertsen said Bitcoin price could plummet if bond yields and technology shares plunged. Crypto companies and exchanges may also face liquidity issues that lead to more bankruptcies in the industry, causing investors to lose confidence in digital assets.
Mobius Capital Partners founder Mark Mobius also said tighter monetary policy by the Fed could prompt a bearish trend in the Bitcoin market. Currently, the market predicts that the Fed will increase interest rates by 25 basis points next week. Investors also forecast that interest cuts will happen later than anticipated.