June 17, 2024

Bitcoin’s Positive Feedback Loop Could Push Price Past $120,000

  • Bitcoin could rise above $120,000 if miners hold on to tokens, Standard Chartered analyst Geoff Kendrick said.
  • In an interview with Insider, he admitted that bitcoin’s price gains help with a positive feedback loop.
  • “And so your point about this becoming self-fulfilling, I think it’s really a very important driver.”

Bitcoin miners are creating a virtuous circle that could drive the token’s price beyond what forecasts have already warranted, Standard Chartered analyst Geoff Kendrick told Insider.

That’s because miners often sell fewer tokens when the price rises, a bullish trend that led earlier this month said $120,000 is possible next year, representing a 300% upside from current levels.

In a follow-up interview, Insider asked Kendrick: if miners sold fewer tokens, further driving up prices, would higher prices trigger a positive feedback loop that takes bitcoin past $120,000?

Yes.

“And so your point about this becoming self-fulfilling, I doubt is really a very important driver,” he said.

Miners mostly sell bitcoin to cover costs. But as the price rises and the industry’s previously struggling debt is wiped away, miners are letting less bitcoin be spent.

Another passage is the coin halving in 2024, which is when the reward given to the miners is cut in half. This is to limit the supply of bitcoins, and has historically led to price increases.

“Then if you add in some of the other things, like going near the half cycle, et cetera, then that kind of adds,” said Kendrick. “And then yera yeah, the cycle theoretically just keeps going.”

Miners also have little reason outside of bitcoin price movements to sell the token, he said. Part of this is due to the culture surrounding the industry, with many miners holding on in the hope that bitcoin will eventually reach major highs.

“So they basically want to have a company that starts out when prices are cheap, get cheaper electricity and things, and then hold on. It’s like a super-leveraged play,” he said.

Kendrick is bullish on bitcoin this year, and in April he said it would hit $100,000 in 2024, citing several factors other than miner profitability. Examples included bitcoin’s safe-haven reputation, regulatory adjustments, institutional interest, a decline in alternative currency, and less volatility.

Now, he told Insider that some of these factors suggest that there is more upside to them as well.

For example, BlackRock’s interest in creating a bitcoin ETF indicates growing demand from the investment firm’s clients, and the expected end of the Federal Reserve’s rate hike cycle will help bitcoin somewhat.

The one factor Kendrick would reevaluate was his idea that bitcoin would benefit from disinvestment in other cryptos, or so-called altcoins.

Thus, he noted Ripple’s recent courtroom victory over the Securities and Exchange Commission, which sued the firm in the year 2020 over its cryptocurrency XRP.

However, a recent judge ruled in favor of Ripple, stating that XRP is not a security, meaning it is outside the regulatory reach of the SEC. The news sparked a rally in altcoins.

“So the assumption is, well, if Ripple isn’t [a security]so that’s not the case,” he said.

How long this tailwind for altcoins will last is uncertain, Kendrick said, adding that any institutional success in the formation of bitcoin ETFs would prompt a renewed focus on apex tokens.

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