StanChart sees Bitcoin reaching US$100,000 in 2024, but investors should remain cautious
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Some analysts are saying that Bitcoin could more than triple from its present level before the end of next year.
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SINGAPORE - After crashing in 2022, Bitcoin has risen by around 65 per cent so far in 2023, and on Tuesday evening, traded at just over US$27,000, compared with around US$16,000 on Jan 1.
Now, some analysts say the digital currency’s value could more than triple from its present level before the end of 2024.
In a research note released on Monday, Standard Chartered analyst Geoff Kendrick noted that the crypto winter of 2022 is “finally over”, and that Bitcoin has the potential to reach US$100,000 by the end of 2024.
The so-called crypto winter of 2022
Bitcoin, the largest cryptocurrency by market capitalisation, saw its value fall from US$69,000 in November 2021 to just over US$15,000 12 months later.
But things appear to be turning around. A recent banking sector crisis, which saw Swiss bank Credit Suisse three US banks collapse,
It is also testing the Fed’s resolve to keep interest rates high, and this has raised crypto’s appeal as an alternative investment class.
Mr Kendrick noted that valuation troubles faced by some stablecoins, which are competing cryptocurrencies designed to have a stable value relative to a fiat currency like the US dollar, have also helped Bitcoin regain its reputation as digital gold.
Bitcoin is often referred to as such because it shares some of the characteristics that make gold valuable, such as scarcity.
This is ensured by the fact that Bitcoin’s total supply is fixed at 21 million tokens. This means its code is programmed such that no more Bitcoins can be created beyond that number, making it similar to gold, which is a finite resource.
Currently, around 19 million Bitcoins have been mined and are in circulation, with about 2 million left to be mined, according to the Blockchain Council.
Bitcoin’s code includes a mechanism that governs the rate at which new tokens are created.
As an incentive for Bitcoin miners to process transactions made with the cryptocurrency, they receive a reward for every block of transactions they validate on a digital public ledger known as a blockchain.
The mechanism halves the reward Bitcoin miners receive after every 210,000 blocks of transactions are completed and validated, which is around once every four years or so.
At Bitcoin’s launch in 2009, miners received 50 Bitcoins for each block. This reward will drop to just 3.125 Bitcoins when the next halving is due around April or May 2024.
“While we note that previous halvings have had a successively smaller impact on Bitcoin prices, prices have bounced around each halving,” Mr Kendrick said.
According to Bloomberg, Bitcoin gained about 8,000 per cent in the 12 months following the 2012 cut in rewards. It rose almost 1,000 per cent in the wake of the 2016 cut. The last halving, in May 2020, was followed by a bull run that saw Bitcoin hit its peak of US$69,000.
The next halving holds the potential to trigger an advance of at least 81 per cent, according to Bloomberg Intelligence and financial services platform Matrixport.
Mr Kendrick noted that ongoing developments ensuring that crypto firms are compliant with regulations and measures taken to protect investors should encourage more investments in Bitcoin over the long term. These include institutional investors.
“As a result, we expect Bitcoin’s share of the total digital assets market cap to keep rising, most likely back to the 50 per cent-to-60 per cent range from 45 per cent currently.”
This will help build up Bitcoin’s appeal and drive its value toward the US$100,000 mark, he said.
Still, Bitcoin is notoriously volatile and prone to sudden price changes that can wipe out millions in investors’ funds overnight.
One factor that could potentially affect Bitcoin’s price is its falling liquidity, following the industry’s collapse in 2022 and the ensuing regulatory clampdowns, according to experts quoted by Reuters.
Liquidity is a measure of how easily an asset can be bought or sold without significantly affecting its price. Low Bitcoin liquidity levels therefore imply that investors may find it more difficult to buy or sell Bitcoin at their desired price, which can cause its value to become more volatile.
Research published in 2023 by the Journal Of Risk And Financial Management noted that crypto can be influenced by factors such as changing regulations, liquidity and technical issues, as well as market sentiment.
It pointed out that crypto’s market value is dependent entirely on speculation as there are no underlying assets to support its value.
Another research paper – by the CESifo International Research Network in 2023 – noted that investors tend to view cryptocurrencies as a gamble, and estimated that between 73 per cent and 81 per cent of global investors have likely lost money on their crypto investments.
