Bitcoin Mining Faces Increased Difficulty — 5 Key Updates for This Week

Bitcoin (BTC) begins a new week strongly embracing the “Uptober” sentiment as the weekly close transitions into a typical short squeeze.

In a return to the classic BTC price fluctuations reminiscent of earlier this month, the leading cryptocurrency is approaching $28,000 ahead of the initial Wall Street opening.

Although still within a defined trading range, Bitcoin is keeping traders alert, with both long and short positions being affected by short-term spot price shifts, leading to increasing liquidations.

Market sentiment is shifting in accordance with these movements. As Bitcoin approaches the upper limit of the range, a surge of optimistic forecasts emerges, only to be replaced by anxiety and apprehension when the price declines.

Prominent market analysts remain vigilant, even as October — historically Bitcoin’s most successful month — unfolds.

Behind the scenes, the indicators are robust — network fundamentals are on track to reach new all-time highs, and the mining difficulty is expected to experience what could be its third-largest increase of 2023.

With macroeconomic data giving way to a focus on geopolitical tensions in the Middle East this week, Bitcoin investors have much to monitor regarding external factors influencing BTC price volatility.

Cointelegraph provides an in-depth examination of these market dynamics and more in Cointelegraph Markets’ weekly overview of BTC price catalysts on the horizon.

BTC price: Short squeezes and “old” coins

This week’s weekly close volatility for Bitcoin did not disappoint, with consecutive short squeezes resulting in BTC/USD gaining $1,000, as confirmed by data from Cointelegraph Markets Pro and TradingView.

BTC/USD 1-hour chart. Source: TradingView

The atmosphere leading into the first Wall Street opening is markedly different from that of the weekend and prior, where the downside dominated the scene amid concerning macroeconomic reports from the United States.

Now, optimism is resurfacing, with Michaël van de Poppe, founder and CEO of MN Trading, describing the ascent to multiday highs of $27,975 as a “great move.”

“Dips are for buying; the most favorable entry would be $27,300,” he informed X (formerly Twitter) followers as part of the day’s analysis.

Van de Poppe also anticipated the continuation of the upward trend.

BTC/USD annotated chart. Source: Michaël van de Poppe/X

Addressing the motivation behind the recent activity, monitoring resource CoinGlass highlighted liquidations among short BTC positions.

“At 27450, a significant number of shorts have been liquidated,” it concluded alongside a liquidation heatmap for BTC/USDT perpetual swaps on the largest global exchange, Binance.

“Next focus on the liquidation levels of 26500 and 27660.”

BTC/USDT liquidation heatmap. Source: CoinGlass/X

Trader Crypto Tony adopted a more cautious stance, having previously cautioned about the potential for substantial downside pressure that could drive Bitcoin back to $20,000 in the upcoming months.

$BTC / $USD – Update
Stopped out as we reclaimed the $27,300 resistance zone, and now just sat waiting for my next trigger. The bulls could very well take us up to $29,000 resistance zone, but remember this is a heavy area
If you are longing now just be cautious pic.twitter.com/aQGF1ZVJuL

— Crypto Tony (@CryptoTony__) October 16, 2023

Research firm Santiment noted that the shift in tone involved more than just short squeezes.

“Older” BTC was being transferred, it indicated, having exited wallets after a prolonged period of inactivity just before the rebound to $27,000.

“The largest amount of dormant $BTC changing wallets since July, these spikes in our Age Consumed metric indicate price direction reversals,” part of the accompanying commentary on an illustrative chart stated.

BTC/USD annotated chart. Source: Santiment/X

Dalio warns over 50/50 outcome of “World War III”

In contrast to last week, the macroeconomic landscape in the coming days features fewer significant data releases from the United States.

Instead, concerns regarding the potential market repercussions from the ongoing Israel-Hamas conflict are taking precedence, while the threat of inflation looms in the background.

The latter was previously evident, as successive data releases last week and before indicated U.S. inflation persisting beyond market expectations.

The Federal Reserve’s next meeting to determine interest rates is scheduled for Nov. 1, and with two weeks remaining, inflation indicators will be crucial for risk asset sentiment.

“2 weeks until the November Fed meeting,” financial commentary resource The Kobeissi Letter summarized on X while listing the week’s key U.S. financial events.

These include a speech from Fed Chair Jerome Powell, one of 17 Fed speakers expected to address the public this week.

Key Events This Week:
1. Retail Sales data – Tuesday
2. Housing Starts data – Wednesday
3. Existing Home Sales data – Thursday
4. Fed Chair Powell Speaks – Thursday
5. Q3 2023 earnings season begins
6. Total of 17 Fed speaker events
2 weeks until the November Fed meeting.

— The Kobeissi Letter (@KobeissiLetter) October 15, 2023

In a sign of the extent to which politics may shape sentiment, Kobeissi was among many who referenced a bleak forecast from billionaire investor Ray Dalio, founder of Bridgewater Associates, the world’s largest hedge fund.

In a LinkedIn post on Oct. 12, Dalio cautioned that the risk of “World War III” occurring had risen to 50% over the past two years.

“Fortunately, the progression toward a world war between the biggest powers (the US and China) has not yet crossed the irreversible line from being containable (which it is now) to becoming a brutal war between the biggest powers and their allies,” he wrote.

“If these major powers do have direct fighting with each other, in which one side kills a significant number of people on the other side, we will see the transition from contained pre-hot-war conflicts to a brutal World War III.”

GBTC “discount” closes in on two-year minimum

Beyond BTC price movements, a strong resurgence is occurring in the largest Bitcoin institutional investment vehicle.

The Grayscale Bitcoin Trust (GBTC) is now trading at its narrowest discount to net asset value (NAV) — the Bitcoin spot price — since December 2021.

As Cointelegraph reported, the discount, which was once a premium, was nearly 50% earlier in the year, and GBTC’s recovery has coincided with legal victories for operator Grayscale against U.S. regulators.

Currently, markets seem more confident than ever that a spot price exchange-traded fund (ETF) — which Grayscale intends to create and launch from GBTC — will receive approval, potentially leading to a surge of institutional interest in Bitcoin.

“One significant feature of GBTC is that it doesn’t provide a straightforward mechanism for redeeming shares for actual Bitcoin, and it trades over-the-counter (OTC),” popular trader and podcast host Scott Melker, known as “The Wolf of All Streets,” noted in part of a recent X analysis.

“This structural element can lead to instances where its market price deviates from the underlying BTC value. Factors like market speculation, investor sentiment, liquidity constraints, and even regulatory news can influence this price divergence.”

Melker added that the possibility of GBTC transitioning into an ETF was “still far from a sure thing.”

“At the same time, the U.S. Securities and Exchange Commission (SEC) is also examining several other spot Bitcoin ETF proposals, including those from financial giants like Fidelity, Blackrock, and Franklin Templeton, which adds another layer of complexity and uncertainty to the landscape,” he remarked.

GBTC premium vs. asset holdings vs. BTC/USD chart (screenshot). Source: CoinGlass

Mining difficulty set for imminent new record

The recent BTC price increase has bolstered forecasts for Bitcoin network fundamentals.

Ahead of its next automated adjustment on Oct. 16, Bitcoin difficulty is currently projected to rise to new all-time highs, according to data from monitoring resource BTC.com.

Bitcoin network fundamentals overview (screenshot). Source: BTC.com

This is not unprecedented in 2023, a year in which both difficulty and mining hash rate have frequently reached new records. The upcoming difficulty increase, however, could rank among the top three year-to-date at nearly 7%.

If it materializes, difficulty will surpass the 60 trillion mark for the first time, reflecting the increasingly intense competition among miners and unparalleled Bitcoin network security.

Hash rate estimates, meanwhile, differ significantly by resource. Raw hash rate data from MiningPoolStats indicates the latest all-time high of 497.66 exahashes per second (EH/s) achieved on Oct. 9.

Bitcoin raw hash rate data (screenshot). Source: MiningPoolStats

The elevated difficulty combined with relatively low BTC price levels inevitably raises questions regarding miner profitability. With costs continuing to rise per Bitcoin, concerns periodically arise about how motivated miners are to persist.

Similar to hash rate, estimates vary regarding the actual aggregate production cost per Bitcoin, with numerous factors, including physical location, influencing the calculation.

As Cointelegraph reported, next year’s block subsidy halving will also reduce the amount of BTC received per mined block by 50%.

“I think price is okay for miners at the moment, but with the halving and increasing difficulty, it needs to rise rapidly,” James Straten, research and data analyst at crypto insights firm CryptoSlate, commented in part of X commentary last week.

A precarious “Uptober”

Is the outcome of “Uptober” 2023 uncertain?

Related: Bitcoin signals potential range expansion— Will SOL, LDO, ICP and VET follow?

Even slight fluctuations in BTC spot price can impact the month-to-date gains for October due to the strength of the current trading range, which has been established since March.

#Bitcoin We did not get Uptober or Rektober but instead we got Choptober.
This would be the first time after 4 years where Oktober would end up red.
Last month was the first green September after 6 years.
We're only halfway through the month though so a lot can change. pic.twitter.com/NsoVvH5O7D

— Daan Crypto Trades (@DaanCrypto) October 14, 2023

While negative just last week, the ascent to $28,000 now indicates that BTC/USD is up 3.5% since the start of the month.

With two weeks remaining until the monthly close, Bitcoin’s final performance is still uncertain. A 3.5% increase, while not unfavorable, would still mark Bitcoin’s weakest October month since 2018.

Data from CoinGlass further reveals that the worst October on record in 2014 resulted in “only” 12% losses for Bitcoin, leaving the possibility of a new negative record should conditions worsen.

BTC/USD monthly returns (screenshot). Source: CoinGlass

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.