Standard Chartered believes that the current crypto “winter” is over and that Bitcoin, the key digital currency, is set to reach US$100,000 by end of next year.
“The recent banking sector crisis has helped to re-establish Bitcoin’s core use case as a decentralised, trustless and scarce digital asset,” writes Geoff Kendrick, the bank’s head of forex research, West, and digital assets research, in his April 24 note.
Furthermore, troubles faced by stablecoins, a competing digital asset to Bitcoin, has also helped the latter regain its reputation as ‘digital gold’.
For example, USD Coin (USDC) was temporarily de-pegged as its issuer, Circle, held US$3.3 billion with Silicon Valley Bank (SVB), which suffered from a run and has to be rescued. Earlier, in May 2022, there was the collapse of Terra/Luna which resulted in the de-peg of Tether (USDT).
“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,” says Kendrick, who expects Bitcoin’s share of total digital assets market cap to keep rising, most likely back to the 50-60% range, from 40% before the SVB collapse and 45% currently.
Following the SVB incident, Bitcoin jumped from below US$20,000 to above US$30,000.
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One side effect was to dramatically increase the profitability of Bitcoin mining companies, which StanChart estimates are incurring costs of around US$15,000.
In addition, the broader macro backdrop for risky assets is also gradually improving as the US Fed nears the end of its tightening cycle.
“While Bitcoin can trade well when risky assets suffer, correlations to the Nasdaq suggest that it should trade better if risky assets improve broadly,” writes Kendrick.
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Over the longer term, the next Bitcoin halving is due around April to May 2024. Halving refers to the mechanism to cap supply whereby the reward for mining a new block is halved after every 210,000 blocks produced.
Kendrick observes that previous halvings have had a successively smaller impact on Bitcoin prices. However, prices have bounced around each halving. “This should add a cyclical tailwind to the structural positives at play,” he reasons.
Further down the road, Kendrick sees favourable regulations towards Bitcoin. For example, the EU’s Markets in Crypto Assets (MiCA) regulation has been passed by the European Parliament, and the regulation could have constructive implications for investor interest and volatility.
“Further positive regulatory steps in the US and UK are also likely,” says Kendrick.
“While sources of uncertainty remain, we think the pathway to the USD 100,000 level is becoming clearer,” he adds.
