What withdrawal? Bitcoin may still reach $100,000

Year to date, Bitcoin (CRYPTO: BTC) is up 78%, and that’s after a minor pullback that saw it lose nearly 10% of its value after briefly touching the $30,000 level for the first time in nearly 10 months. At the same time, Bitcoin continues to outperform just about every other major cryptocurrency.

But how much higher can Bitcoin go? In mid-April, Standard Chartered Bank issued a new $100,000 price target for Bitcoin for the end of 2024. At current prices, that would suggest a monster rally that would see Bitcoin more than triple in value in less than 20 months. So let’s dive into some of the assumptions used to create that $100,000 price target.

The Case for Bitcoin to $100,000

A big reason Bitcoin could explode in value has to do with the current macroeconomic environment. According to Standard Chartered Bank, the “crypto winter” is officially over now and people can go back to investing in crypto. Also, if you buy into the assumption that the Federal Reserve is done tightening and will now leave interest rates alone or even cut them before too long, then that will obviously be a huge positive for the entire crypto market. Risk assets such as Bitcoin tend to flourish when rates are low or declining.

Image source: Getty Images.

At the same time, Bitcoin is regaining its status as a “safe haven” asset that people put their money into when things look tough in the wider economy. After the first phase of the banking crisis involving Silicon Valley Bank, some rushed to take their money out of traditional banks and put it into Bitcoin, which they perceived as a superior store of value. The same seems to be happening now First Republic Bank (FRC 8.79%)with Bitcoin suddenly increasing in value after a brief pullback.

But can Bitcoin triple in value?

OK, that sounds good, but is it really enough to propel Bitcoin to $100,000? Remember, the record for Bitcoin is $68,789.63. So not only is Bitcoin going to face a huge amount of resistance fighting through the $40,000 level, the $50,000 level and the $60,000 level, but it’s also going to face an epic battle hitting a new all-time high at the $70,000 level. We already saw a foreshadowing of this with Bitcoin at $30,000 when it immediately pulled back.

I think the market is going to need a huge new catalyst to propel Bitcoin to stratospheric new heights. Standard Chartered Bank mentioned a few other factors that could help Bitcoin – such as the increasing profitability of Bitcoin miners – but these all seem like minor technical factors rather than major breakthrough catalysts.

The Bitcoin Halving

However, one factor that Standard Chartered Bank alluded to could just be big enough to propel Bitcoin to $100,000. This is an event known as the Bitcoin Halving, and it only happens once every four years. The next Bitcoin halving will take place in 2024 and is already being talked about in crypto circles as a huge opportunity for Bitcoin investors.

In a halving event, the reward for mining a block of Bitcoin drops by half. Right now, miners get 6.25 Bitcoins every time they add a new block to the Bitcoin blockchain. However, in April 2024, the reward will drop to 3,125 Bitcoins. That might not sound like a big deal, but it actually has huge implications for how Bitcoin trades. After each halving, Bitcoin becomes more scarce and more deflationary. Both of these factors should theoretically increase the value.

And indeed, in previous halving cycles the results have been dramatic. Crypto hedge fund Pantera Capital has modeled past Bitcoin halving cycles and found that Bitcoin tends to rise in value during the 477 days before the halving and then explode in value afterwards. As a result, back in November, Pantera believed that Bitcoin could reach $36,000 in early 2024 and then skyrocket to $149,000.

Warnings

Just remember that past performance is no guarantee of future performance. And the impact of each Bitcoin halving cycle seems to diminish, so it may not be realistic to expect the same kinds of gains that we saw in 2012, 2016 or 2020. And finally, it’s worth noting that Standard Chartered Bank actually predicted in December that Bitcoin could crash to the $5,000 level in 2023, so it’s safe to say that no one really knows what Bitcoin will do this year.

But if you are looking for a reason why Bitcoin can reach $100,000 in 2024, I think it has to be the next halving cycle for Bitcoin. Fed easing is going to make it more likely that Bitcoin will get the first lift. A better overall macroeconomic outlook for the US economy could reduce friction enough for Bitcoin to hit its escape velocity. But for Bitcoin to skyrocket to the moon, it will need the fuel from the halving. As we approach the midway point of 2023, look for discussion of this factor to dominate any future predictions of Bitcoin price performance in 2024.