Fundstrat’s head of data research, Sam Doctor, explained, “The release of the next generation of rig hardware should trigger a new round of capex as well as hash power growth, which could accelerate if BTC price appreciates.”
Capex is short for capital expenditure, and refers here to upgrades in technology such as mining rigs. Hash power growth can be thought of as cryptocurrencies such as bitcoin using proof of work, relying on a unit of measure basically recording power consumed by the network to keep it humming along, in this case, roughly every ten minutes a block is found or generated.
“We believe the current path of hash power growth supports a BTC price of about $36,000 by 2019 year end, with a $20,000-$64,000 range,” Mr. Doctor continued. “The primary net sellers, in our view, are bitcoin miners, and the rest are transactions between investors.”
If a multiple of four from its current price seems ambitious, the actual range from Fundstrat pushes the high to nearly twice even that number. Mr. Doctor uses mining economics to establish a floor support level due to its supposed relative growth going forward. Through next year, researchers believe mining hash power will indeed boom by 350 percent.
Most of the price moon prediction depends upon miners Fundstrat assumes will hold their position through the crypto winter, and then sell once it recovers (and better). Moving variables in the mining economy include rig innovation, electricity cost, and the ability to lower hardware temperatures.
Mr. Doctor further elaborated how “miners verify and process transactions, supporting the network in exchange for mining rewards and transaction fees. We argue that the Price/Miner’s Breakeven Cost multiple has proven a reliable long-term support level, and further, that the likely trajectory of future mining infrastructure growth should underpin Bitcoin price appreciation into year-end 2019.” And harder numbers Fundstrat asserts to be $6K per BTC for Bitmain’s Antminer S7, and just over $2K for its S9 model.
Such rosey price predictions are nothing new for Fundstrat Global. Its very public face, and really only prominent Wall Street analyst to take cryptocurrencies seriously as an asset class, Tom Lee, famously last Summer forecast BTC becoming a store of value on par with gold, reaching a high of as much as $55K by 2022. As more information has come in, Mr. Lee has also said he expects the digital asset could moon to $25K by the end of this year alone.
Still other analysts believe the causal connection between mining activity and speculative price is not well established, leading to perhaps more outlandish price calls as a result. And with other cryptocurrencies battling it out for market share, offering varieties of features not currently found in bitcoin, the BTC price explosion might not be such a given. At press time, BTC price hovered around $8,500, down almost ten percent.