Miner profitability will push bitcoin to $50K this year: StanChart

Standard Chartered expects the profitability of bitcoin miners will play a crucial role in driving the price of bitcoin (BTC) to $50,000 by the end of this year, and to $100,000 by the end of 2024.

In a Monday note, Geoffrey Kendrick, StanChart’s head of FX and digital assets research, highlighted the role played by miners in determining the overall supply of newly mined bitcoin.

This reduction in selling leads to a decrease in the overall supply of bitcoin, which ultimately drives up the price.

StanChart’s prediction aligns with an earlier forecast in April, when Kendrick said several factors would propel bitcoin toward $100,000 by the end of next year. 

However, this time he emphasized the significance of miner profitability as the key contributing factor, considering it to be more impactful than earlier believed.

Q2 showed drop in miner sales, boosting prices

StanChart noted that during the first quarter of 2023, the 12 largest listed miners, representing 20% of global bitcoin mining, sold 106% of the bitcoin they mined. 

This selling percentage appears to have slightly decreased to below 100% in the second quarter, reducing the supply and contributing to higher prices.

By adjusting their selling strategy, miners have the potential to benefit from the anticipated price increase in bitcoin.

StanChart expects bitcoin to rise to about $50,000 by the end of 2023 as the share of newly mined bitcoin sold is projected to decrease to around 20% to 30%.

This adjustment translates to miners reducing the number of bitcoin they sell per day from the current 900 to between 180 and 270.

Increased cash profits set to drive decreased selling

The bank highlighted that after speaking with bitcoin miners directly, it became evident that miners have three sources of cash: selling bitcoin, selling equity or borrowing. 

Miners indicated that selling equity was unlikely due to low equity prices, and borrowing money was unfavorable due to high interest rates. 

Consequently, selling bitcoin remains the most feasible option for miners to raise cash in the current cycle.

However, with higher bitcoin prices and increased cash profits, selling is expected to decrease significantly over time, supporting further price increases.

“We reiterate our end-2024 BTC price target of around USD 100,000, with potential upside from reduced miner selling,” Kendrick said.

Newcomers shine in cost efficiency

The bank evaluated miner profitability based on three factors: the direct cash cost of mining one Bitcoin (mostly electricity costs), the total cash costs per Bitcoin mined and whether mined bitcoins are sold or held.

They found that cash costs varied among companies, with Cipher Mining and TeraWulf as relative newcomers having the lowest costs. 

On the measure of all-cash costs, Cipher Mining performed well, while larger-scale operations like Riot and Core Scientific also demonstrated favorable results.

Goldman Sachs earlier predicted a $100,000 target for bitcoin

Various analysts have weighed in on bitcoin’s potential trajectory. At the start of last year, Goldman Sachs said bitcoin could hit $100,000 in the next five years if investors treat it like gold.

More recently, Matrixport’s head of research predicted the cryptoasset would hit $125,000 by the end of next year.

---

Get the news in your inbox. Explore Blockworks newsletters:

• Blockworks Daily: Unpacking crypto and the markets.
• Empire: Crypto news and analysis to start your day.
• Forward Guidance: The intersection of crypto, macro and policy.
• 0xResearch: Alpha directly in your inbox.
• Lightspeed: All things Solana.
• The Drop: Apps, games, memes and more.
• Supply Shock: Bitcoin, bitcoin, bitcoin.