Bitcoinminingdifficultyjustsetanewrecord,hittingheightsthatareforcingminerstothrowevenmoreresourcesatthenetwork.

WithcompetitionheatingupandBitcoinholdingsteadynearitsall-timehighs,theindustryfacesnewpressures.Nowminersneedevenmorecomputationalpowertokeeppace,leadingtohighercostsandpotentiallystrainingthesystem’ssustainability.

Minersaren’tjustdealingwithnewdifficultylevels.Bitcoin’srecentpriceactionhasthemscramblingaswell.Asdemandrises—largelydrivenbyETFpurchases—miningcompetitionisclimbing,butsoareexpenses.

Andtransactionfees,whichoftenhelpcoverminingcosts,mightnotbeenoughtooffsettheserisingexpenses.That’scausingsometowonderifthisspikeindifficultywillstartcuttingintoprofits.

ETFdemandanditsroleinBitcoin’spricesurge

Bitcoinhasbeentradingwaytooclosetoitsall-timehighrecently,andthepushfromU.S.-basedETFsisabigpartofthat.SinceearlyOctober,ETFactivityhasspikedsignificantly.Atthebeginningofthemonth,netdailyETFpurchasesweredownby1.3KBitcoin.

BytheendofOctober,though,thatvolumehadskyrocketedto5.8K.OnOctober13alone,ETFspurchased7.7KBitcoin—thehighestsingle-daybuysofar.

AsdemandfromETFsgrows,it’sworthnotingtheshiftingdynamicswithOver-The-Counter(OTC)desks.CryptoQuant’sdatashowsthatOTCdeskshavekeptBitcoinsuppliesatrecordlevels,withatotalinventoryofaround416KBitcoin,comparedto183K–193Katthestartoftheyear.

ThissurplusmeansETFscangettheirfillwithouttouchingpublicexchangesandspikingtheprice.Instead,theybuystraightfromOTCdesks,whichshieldsthebroadermarketfromsharppriceswings.

ThedailyETFpurchasesnowrepresentjust1%to2%ofthetotalinventoryheldbyOTCdesks.Comparethattothefirstquarterof2024,wheredailyETFbuystookupamuchlargerchunk—upto12%ofOTC’sinventory.ETFswouldneedtorampupdemandevenmoreifthey’regoingtomakeaseriousdentinOTCsupplies.

Andthere’sashifthappeninginthoseinventorynumbers.OTCdesks’overallBitcoinbalanceisn’tclimbinglikeitdidearlierthisyear.DuringQ2andQ3,theirstockpilesballoonedbyover77Kand92KBitcoininAugustandJune,respectively.Inthelastmonth,however,thatbalancerosebyonly3K.

LowerdailyBitcoininflowstothesedesks(downto90Kfromtheyear-to-dateaverageof189K)arehelpingtoslowtheinventorygrowth.ThisdropinsupplymightaddupwardpressuretoBitcoin’spriceifETFdemandholdsstrong.

MarketnervesaheadoftheU.S.election

WiththeU.S.presidentialelectionapproaching,Bitcoinisfacingmarketjitters.Tradingactivityhasreachednewheights,withopeninteresthittingrecordsthisweek.Afterpushingtowardanall-timehighof$73,800,Bitcoinstumbled,signalingthatmarketplayersarefeelingthestrain.Analystsarenowpredictingapossiblepriceretracementbeforeanyseriousgainsresume.

CryptoanalystTitanofCryptospottedalocalbottomat$66,200andquestionedifabouncemightfollow.HischartshowedIchimokuclouddataforaone-daytimeframe,highlightingapricedipbelowtheTenkan-sentrendline,suggestingBitcoincouldstillslidefurther.

Hesaid,“BTCcouldn’tcloseaboveTenkan,signalingapossiblemoreprofoundpullback.Ifthebreakoutisconfirmed,wemightseearetestofKijunaround$66,200,whichcouldmarkalocalbottom.”

BitcoinclosedOctoberwitha10%gain,finishingthemonthabove$70,000forthefirsttimesinceMarch.Butwiththeelectiondaysaway,themarketisn’texactlystable.

Observersnotethatelectionuncertaintycouldtriggervolatilityintheshortterm,whileBitcoin’soverallsupply-demanddynamicsremainbullish.Investorshaveexpressedmixedopinionsonhoweachcandidatemightimpacttheindustry.

NicPuckrin,CEOatCoinBureau,said,“What’sdrivingpriceactionisundoubtedlytheelection.”Headded,“ThemarketswilltaketheircuebasedonwhowinstheWhiteHouse.Trumpiswidelyseenaspro-crypto,althoughirrespectiveofwhowins,Bitcoinisstillprimedforapump.”

Election-relatedtensionisamplifyingBitcoin’stypicalOctober-Novemberrally.Historically,thesemonthshavebeenstrongforthecryptocurrency,withBitcoinclosinghigherinsevenofthelastelevenNovembers.Whileinvestorsprepareforpost-electionswings,somearebettingthataTrumpwincouldadd10%–15%toBitcoin’sprice,whileaHarrisvictorymightcauseasimilar-sizeddip.

ThiselectionseasonalsooverlapswithkeymilestonesforBitcoin.Octobermarkedsixmonthssincethelasthalvingevent,whichhalvedtherateofnewBitcoinissuance.Withsupplytighteninganddemandincreasing,someanalystsbelieveBitcoinisonthepathtoanotherrecord,thoughelectionvolatilitymightbeastumblingblockinthenearterm.

cryptopolitan.com