Bitcoin’s biggest in-market risk right now

Federal Reserve (FED) monetary policy continues to be a defining factor in both financial markets around the world and Bitcoin. With this in mind, all eyes are now on November 2nd, when the next Federal Open Market Committee (FOMC) meeting is scheduled.

However, while this is an external market risk, there is also an internal market risk that is currently occurring and should not be underestimated from a historical perspective: the capitulation of Bitcoin miners.

The longer Bitcoin falls and the price stays at current levels, the more pressure the margins of Bitcoin miners will be due to the divergence between price and hashrate.

Bitcoin mining difficulty reaches new ATH

Looking at Bitcoin’s mining difficulty adjustment made yesterday, we can see that it increased again by 3.44%. This follows his historic adjustment on October 10, when mining difficulty increased by 13.55%.

#bitcoin Mining difficulty rose +3.44% to new all-time highs as hash rates continue to soar.

Minor is relentless. pic.twitter.com/4GEyHxYoZ8

— Dylan LeClair 🟠 (@DylanLeClair_) October 24, 2022

The difficulty takes into account the fluctuating hashing power on the network and is updated approximately every two weeks so that a new bitcoin is created approximately every 10 minutes (block time).

Therefore, yesterday’s correction could put further pressure on already struggling miners who are witnessing declining profits. Will Clemente, co-founder of Reflexivity Research, claimed Its “miners are currently the biggest risk to the intra-Bitcoin market at IMO”.

According to him, the leading theory behind the steady rise in hashrate is that well-funded players are trying to lock out inefficient miners and acquire their assets cheaply, “Rockefeller-style.” is.

As a result, minor surrender may occur. During this event, a non-profitable miner will have to sell both his mining hardware and the bitcoins he holds. As seen with past miner capitulations, this could cause significant selling pressure on the Bitcoin price on a large scale.

Clemente said a second minor surrender was becoming more likely after the first period in June. The main metric to watch is hash ribbons.

Clemente Conclusion:

Think about who this entity is who finds it advantageous to mine with BTC prices down 70%, energy prices high and hash prices at all-time lows. I wonder if they have excess energy or are large players with access to very cheap energy. […] I’m very curious as it must be someone with very low energy costs. I haven’t seen a great answer so far.

Big name bitcoin miners in trouble?

Dylan LeClair, senior analyst at UTXO Management and co-founder of 21stParadigm I got it Hash price, or miner revenue per TeraHash, recently surpassed 2020 all-time low. If the history of past bear markets is to repeat itself, the price drop is just beginning, he said.

Furthermore, he revealed that he had heard “delicious rumors are flying around that some well-known bitcoin miners are in trouble here.”

According to him, the continued pressure on Bitcoin miners could end in two scenarios. If anything, this is the bottom. “Lack of volume indicates apathy from sellers. Extended consolidation/accumulation period,” LeClair said.

However, the scenario that analysts believe is more likely is that BTC has now hit levels like $6,000 in 2018/2019. A minor surrender event occurs.

At the time of writing, BTC’s price remained volatile, hovering around $19,300.