Bitcoin is set for a massive surge in its price through next year, thanks to the improvement in cryptocurrency mining economics, Fundstrat, the research firm famously bullish on the top cryptocurrency, said in a report.
"The likely trajectory of future mining infrastructure growth should underpin Bitcoin price appreciation into year-end 2019," Fundstrat strategist Sam Doctor said in the report.
"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," the firm added.
Cryptocurrency mining is the process to generate these currencies by rewarding miners for verifying and processing transactions.
Fundstrat believes the Bitcoin Price to Mining Breakeven Cost metric (P/BE) provides an important long-term support level.
The firm expects the crypto mining economy to grow over the next several years. The prediction that Bitcoin would reach around $36,000 by 2019-end is based on the historical average 1.8x P/BE multiple.
The only risk is that a major shift in the trajectory of hash power could change the P/BE support level of Bitcoin's price, Fundstrat said.
Electricity cost escalation is slowing as the network becomes more efficient with new rigs coming to market, thus giving higher hash power per watt, Fundstrat said.
The firm noted that mining is increasingly concentrated in large scale operations and small miners must join mining "pools" to stay competitive.
Earlier this year, Fundstrat co-founder Thomas Lee had estimated that Bitcoin would reach $20,000 by the middle of this year and a hit a record $25,000 by the end of this year.
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