- A positive feedback loop driven by bitcoin miners holding onto their tokens could push the price of bitcoin to new heights, says Geoff Kendrick, an analyst at Standard Chartered.
- In a recent interview, Kendrick acknowledged that the price gains of bitcoin contribute to a self-fulfilling cycle, which could potentially propel the price of bitcoin above $120,000.
- “Your point about this becoming self-fulfilling is actually a very crucial factor,” Kendrick emphasized.
Standard Chartered analyst Geoff Kendrick suggests that bitcoin miners are contributing to a positive feedback loop that could propel the price of bitcoin above already optimistic predictions.
As the price of bitcoin rises, miners tend to sell fewer tokens, which is a bullish behavior. Kendrick previously stated that a price of $120,000 could be achieved next year, representing a potential 300% upside from current levels.
In a recent interview with Insider, Kendrick was asked if the positive feedback loop, where higher prices lead to reduced selling by miners resulting in further price increases, could push bitcoin’s price even higher than $120,000.
His response was affirmative.
“So your point about this becoming self-fulfilling is actually a very important driver,” Kendrick stated.
Miners primarily sell bitcoin to cover their costs. However, as the price increases and previous industry challenges fade away, miners are holding onto their bitcoin instead of selling.
Furthermore, the upcoming halving of bitcoin in 2024, where the mining reward is cut in half to limit the supply of bitcoins, is another factor that could drive price increases.
“If you add in other factors such as nearing the halving cycle, for example, it adds to the positive feedback loop,” Kendrick explained. “And then, yes, the cycle theoretically continues.”
Kendrick also noted that miners have little incentive to sell their bitcoin based solely on price movements. Many miners hold onto their tokens with the expectation that bitcoin will eventually reach new all-time highs.
“They essentially want to establish a company when prices are low, secure cheaper electricity, and hold onto their bitcoin. It’s like a highly leveraged strategy,” he said.
Kendrick has been optimistic about bitcoin’s prospects throughout this year. In April, he predicted that bitcoin would reach $100,000 by 2024, citing various factors beyond miner profitability. These factors include bitcoin’s reputation as a safe-haven asset, regulatory adaptations, institutional interest, decline of alternative currencies, and reduced volatility.
In his recent interview with Insider, Kendrick highlighted that some of these factors also indicate further upside potential.
For example, the interest of investment firm BlackRock in creating a bitcoin spot ETF suggests increasing demand from their clients. Additionally, the anticipated end of the Federal Reserve’s rate-hiking cycle would marginally benefit bitcoin.
However, Kendrick mentioned that he would reassess his previous view that bitcoin would benefit from divestment in other cryptocurrencies or altcoins. He pointed to the recent legal victory of Ripple over the Securities and Exchange Commission (SEC), where a judge ruled in favor of Ripple, stating that its cryptocurrency XRP is not a security, which led to a rally in altcoins.
“So the assumption is that if Ripple is not considered a security, then these other altcoins are also exempt,” Kendrick explained. “That’s why we witnessed significant price increases in altcoins like Solana, for instance.”
Nevertheless, Kendrick expressed uncertainty about how long this favorable trend for altcoins would last. He also mentioned that if institutional success is achieved in establishing bitcoin ETFs, attention would shift back to major cryptocurrencies.
