By
Steve Muchoki
April 23rd, 2024
Analysis of the Bitcoin mining cost metrics conducted by Fundstrat’s quantamental strategist has led the market research firm to predict an upcoming rise of the flagship cryptocurrency.
As soon as the Bitcoin skyrocketed price had hit all the charts at the end of the last year, its prediction became the hottest topic for both admirers and skeptics of the fronted cryptocurrency. While some say that, eventually, it will lose the shine in front of increasingly pronounced market regulations, some still believe the severity of Bitcoin’s price decline to be a temporary phenomenon.
The heads of top financial institutions has been exploring the cryptocurrency market searching for crucial factors that contributes to the Bitcoin pricing in a bid to develop a unique scheme that will predict its price. New research of Fundstrat’s Quantamental Strategist Sam Doctor has recently proposed to exploit a Bitcoin mining cost metrics, also known as P/BE, for forecasting its value.
The study, conducted by Wall Street strategy firm Fundstrat Global Advisors, states that that the ratio between the Bitcoin price and miners’ breakeven cost (P/BE) has proven to be a “reliable long-term support level” for the flagship cryptocurrency and that current and future mining infrastructure development will “underpin Bitcoin price appreciation into year-end 2019.”
Bitcoin is created through an energy-intensive process known as mining, in which computers receive the cryptocurrency as reward for solving complex mathematical equations. Processing power to guess the solution is defined as “hash power”, and according to Fundstrat, the release of the next generation of rig hardware should trigger a new round of hash power growth that, in turn, could support a BTC price.
In his report, Doctor wrote that Bitcoin price is expected to hit a $36,000 benchmark by the end of 2019. He also added that although a $36,000 threshold is the most likely target for Bitcoin price, the calculated range varies from $20,000 to $64,000 and Bitcoin can ultimately end up anywhere in the established diapason depending on the landscape development over the next 18 months.
Even the lower end of that range represents a 231 percent increase from the current Bitcoin price, while the more optimistic target represents a 739 percent surge. At the time of writing, Bitcoin is trading at $8,653.41 as CoinMarketCap shows.
However, the economics of Bitcoin mining likely create a support level for the cryptocurrency. Mining firms have been reportedly scaling up their operations following last year’s prolonged bull market. As a background for its analysis, Fundstrat has compared the cash break-even price for the older Antminer S7 model that estimated $6,003 per Bitcoin, and $2,368 for the newer Antminer S9. Both models are made by Beijing-based Bitmain, the world’s dominant mining hardware manufacturer that is said to have made as much as $4 billion in operating profit during last year. In the meanwhile, its largest competitor, Canaan is preparing to hold an initial public offering that it believes will provide it with a $1 billion valuation.
Fundstrat co-founder Tom Lee is the only major Wall Street strategist to cover Bitcoin. He issued his first formal report on the cryptocurrency last July, when Bitcoin traded near $2,540, claiming that cryptocurrencies are rapidly replacing gold as the most popular “store of value”. Thereafter the firm has published a number of analyses that suggest the cryptocurrency ecosystem will experience sustained long-term growth and Lee himself predicted Bitcoin to reach $20,000 to $55,000 by 2022.