Recently, Citibank forecasted the price of the leading cryptocurrency to reach $318,315 by the end of 2021. The forecast looks more hype than realistic, but if it comes true, it would have a significant impact on the crypto industry. This was stated by BitRiver’s Chief Commercial Officer Dmitry Ushakov.
Miners
At a Bitcoin price of $300,000, owners of mining hardware, even currently unprofitable ninth-generation ASICs, will return to mining. This will happen even in countries with expensive electricity, such as Japan and South Korea, because the cost of electricity will cease to play a significant role, the expert says.
“The growth of the global hash rate will roughly double the difficulty of computing. The equipment that is currently written off will still be profitable and will generate colossal income. The only question is its placement, ensuring uninterrupted power and service.”
Data centers
Data centers will also benefit, as some of their mining equipment has already been replaced with newer models. According to BitRiver, data-center clients have replaced between 30% and 60% of their equipment.
“A ‘second life’ for miners” will bring to the market such a number of devices that it physically cannot be hosted on existing sites,” notes Dmitry Ushakov.
Rapid construction of new sites without proper maintenance and stable supply will lead to a mass outage of ASIC miners.
“The average level of service at data centers oriented to cryptocurrency mining will decline sharply, and the process of returning to the previous level will take years,” the expert says.
Equipment manufacturers
The rise in the coin’s price by almost 20 times will attract new users. Because the mining market is characterised by a permanent shortage of equipment, new clients will face a sharp shortage.
“Based on the payback timelines for ASICs of around a year and given the doubling of the computing difficulty, S19 and similar ASIC models will increase in price by roughly tenfold,” says BitRiver’s CCO.
As a result, the entry barrier to the market will become insurmountable for most users. At the same time, there is no surplus of mining equipment in the market.
“Manufacturers are far better off mining themselves than selling miners. But they will have to release some to the market to retain their client base,” Ushakov explains.
Major holders and institutional investors
Institutional investors and large Bitcoin holders have the option to seek guidance from analysts to avoid undue losses. However, this threatens market stagnation, the expert warns.
“New money inflows into both mining and the crypto market as a whole will stop. Many investment rounds will be on hold until the situation clarifies. Altcoins will not be able to react to such a rapid Bitcoin surge, and blockchain projects that have not yet moved into fiat will go bankrupt.”
The situation will normalize after a correction that will inevitably come, ejecting from the market “excess” participants, adds Ushakov. However, such “ups and downs” are not particularly attractive to institutional investors – no investment model contemplates such risks.
Conclusion
Dmitry Ushakov remains skeptical about the Citibank analysts’ forecast, but believes that in the long run the positives of such a scenario outweigh the negatives.
The Bitcoin price at around $300,000 will attract a gigantic number of users on the one hand, but on the other it will slow the development of the crypto industry.
Regulators will have an incentive to regulate the market, though it is unlikely to be positive due to authorities’ drive to protect non-professional investors.
“However, a large number of non-professional market participants will help the everyday circulation of cryptocurrencies, which will ultimately serve as an enabling stimulus for the crypto economy,” explains BitRiver’s CCO.
Earlier Bloomberg analyst Mike McGlone stated that after Bitcoin reaches the $20,000 mark the capitalization of the leading cryptocurrency would reach $1 trillion.
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