A banking view on the crypto scene: "Bitcoin is headed towards $100,000"

A banking view on the crypto scene: "Bitcoin is headed towards $100,000"

Many financial institutions have been closely monitoring the cryptocurrency market, including the value of Bitcoin. Recently, several banking experts have made predictions about the future of Bitcoin, with many suggesting that the value of the digital currency is set to skyrocket in the coming months.

One such prediction comes from a major banking institution, which has suggested that Bitcoin could reach $100,000. The bank cites several factors that could contribute to this significant increase in value, including increased demand from institutional investors, the growing popularity of cryptocurrencies, and the continued development of blockchain technology.

Despite some concerns about the volatility and potential risks associated with cryptocurrencies, many financial experts are bullish on Bitcoin and other digital currencies. With more and more investors entering the market and an increasing number of businesses accepting cryptocurrencies as payment, it seems likely that the value of Bitcoin will continue to rise in the years to come.

As the banking climate becomes tense due to rising interest rates and simmering inflation, many investors are considering assets that may perform well in the coming years. One of them is Bitcoin, which has doubled its price in 2023, rising from just over $15,000 to a peak of over $30,000. Is it an asset worth considering for investment?

Some experts are pointing in that direction. According to a recent report by Standard Chartered, Bitcoin (BTC) has the potential to reach $100,000 by the end of 2024. This analysis identifies the factors that could contribute to this increase in value. Some of these factors already exist, while others are somewhat further off, but they should be taken into account when setting clear goals.

"One of the factors that has helped to restore the primary use case for Bitcoin is the recent banking sector crisis," as Standard Chartered explains. For the analysis firm, this crisis has helped Bitcoin to be seen as a decentralized, reliable and scarce digital asset. "In addition, the problems faced by stablecoins, which are competing digital assets, have helped BTC regain its reputation as 'digital gold,'" they say.

Standard Chartered expects the share of Bitcoin in the total market capitalization of digital assets to continue increasing, most likely back to the 50-60% range (from 40% before the SVB crash and 45% currently). "The price increase associated with BTC, from less than $20,000 before the SVB issuances to over $30,000, has dramatically increased the profitability of Bitcoin mining companies. With the Bitcoin price now well above the estimated $15,000 direct costs, it is unlikely that miners will sell many coins," they add.

In addition, the more dynamic macroeconomic context for risk assets would also be gradually improving as the Fed approaches the end of its tightening cycle, according to these experts. "Although BTC can trade well when risk assets suffer, correlations with the Nasdaq suggest that it should trade better if risk assets improve overall," they specify.

But these would not be the only elements to take into account. In the analysts' view, regulatory developments should provide a tailwind for the crypto. The EU's Markets in Crypto-Assets (MiCA) regulation has been approved by the European Parliament, and the regulation could have constructive implications for investor interest and volatility. Other positive regulatory measures are also likely in the US and the UK. "Regulation may help increase investor confidence in the cryptocurrency market, which in turn could benefit Bitcoin," they highlight.

Focus on the halving

In addition, while the halving of new Bitcoin creation could have a positive impact on prices, it is also important to note that prices have decreased after previous supply reductions. Therefore, it cannot be guaranteed that the Bitcoin halving will have a positive impact on the cryptocurrency's price.

According to the report, the cyclical impact of halvings on Bitcoin prices is due to two factors: "the impact on the asset's inflation rate and the impact on mining behavior before and after the halving." Bitcoin's inflation rate has fallen to around 1.8% currently from 4.2% before the May 2020 halving. "The reduction in reward also has the effect of reducing the amount of computing power on the network, or the hash rate, as some miners will leave the market due to lack of profitability," they comment.

While halving cycles are less important for Bitcoin prices than before, the halving itself is likely to remain a positive factor in prices, as analysts explain in the text. In fact, the report highlights that in the first and second cycles, prices reached their 17- and 13-month highs, respectively, after the reductions. "In the third cycle, BTC's all-time high price of $69,000 was reached 18 months after the May 2020 halving," they exemplify.

The analysis also delves into the mechanism of the hash rate in the Bitcoin network. When the reward for mining activity is halved, miners take longer to form each block, meaning the supply of newly minted crypto assets falls even more than the halving of the reward implies, at least for a time.

Afterwards, the algorithm adjusts the difficulty of the calculations required to verify new blocks every two weeks, in order to ensure that the average processing time for each block remains approximately 10 minutes. "If that time exceeds 10 minutes, the algorithm lowers the calculation difficulty in the next review period, reducing the amount of processing power required to produce each block," they comment.

Standard Chartered's report predicts a path towards $100,000 for Bitcoin by the end of 2024 due to several positive factors, such as the banking sector crisis, the Bitcoin halving, the increased profitability of Bitcoin mining companies, and regulatory developments. However, it is also noted that there are still risks and sources of uncertainty in the cryptocurrency market that could have a significant impact on crypto prices. Time will tell.