Fundstrat Global Advisors co-founder, Tom Lee, revealed that Bitcoin (BTC) prices could attain $36,000 mark by 2019. The firm’s Quantamental Strategist, Sam Doctor, also predicted a price range between $20,000 and $64,000 in the next year. The forecast calculations were based on the BTC Price to Mining Breakeven Cost Metric (P/BE metric) that the firm believes to be a reliable tool for measuring the long-term value of crypto assets.
According to Fundstrat, the relationship between the BTC mining costs and the price indicates that the mining economy will grow rapidly in the next few years. This could happen especially if the BTC price jumps from the current ~$9,000 to the $36,000 mark before 2020. Furthermore, Lee foretells that the BTC price will grow to $25,000 by the end of this year.
Last year, BTC prices soared from less than $1,000 to over $19,000 due to a huge influx of investors. Though, the prices dropped to ~$6,000 in February 2018. Fundstrat executives agree that BTC mining is likely to grow since the expectation is most BTC miners will hold it despite falling prices.
Crypto mining relies on several factors including electric power, cooling equipment and specialized hardware called rigs. The firm also commented that the high costs of electric power will gradually slow down as the network increasingly becomes more stable and efficient.
Furthermore, the industry is currently operated on a large-scale although smaller, individual miners are expected to join the pool. The move will lead to better efficiency and large economies of scale benefits. In other words, it will be inexpensive for miners to conduct their activities and in turn lower break-even points. This will then increase BTC prices.
Fundstrat’s proposed BTC metric, P/BE, expects to help in explaining the current market price of BTC. At the same time it will predict the future price fluctuations. However, the cryptocurrency community is still skeptical about using the Fundstrat’s P/BE metric.
For instance, Tuur Demeester, a Texas-based economist and investor recently responded through a tweet that BTC mining activity largely depends on the price, and not the mining costs. Demeester also highlighted that the break-even cost is just a fluid concept. He says it cannot be relied on for predicting the long-term economic value of digital currencies.