Bitcoin faces increased volatility, impacted by geopolitical tensions and inflation concerns, as it approaches a record mining difficulty hike.
The cryptocurrency market begins another week of intense volatility with Bitcoin pushing to regain its position at $28,000, just as Wall Street is about to dive into trading. Recent price action has been nothing short of a rollercoaster ride, confusing traders on both the long and short side of the market.
Short squeezes were the flavor of the week, propelling Bitcoin’s USD value by $1,000. Unlike the cautious sentiment seen last weekend, optimism seems to be the current prevailing mood. MN Trading’s CEO, Michaël van de Poppe, identifies $27,300 as the optimal buying point and expects the positive trend to continue.
Triggers for Bitcoin’s Price Action
CoinGlass, a cryptocurrency monitoring resource, identified that liquidations of short positions significantly influenced the recent uptick. When Bitcoin hit the $27,450 mark, a cascade of short liquidations occurred. The subsequent liquidation levels to keep an eye on are $26,500 and $27,660.
Crypto Tony, a popular trader, recommends a cautious approach, warning that downside risks could push Bitcoin back to $20,000 in the months to come. Santiment, a research firm, noted that “old” Bitcoin is getting back into action, shifting from dormant wallets, which could indicate potential price reversals.
Meanwhile, geopolitical unrest, particularly in the Middle East, and lingering concerns about inflation have replaced macroeconomic data as primary external factors affecting Bitcoin’s price. The Israel-Hamas conflict is attracting attention, adding to the price volatility of Bitcoin. Ray Dalio, billionaire investor, recently added fuel to the fire by suggesting that the risk of a World War III has risen considerably over the last two years.
Inflation continues to exceed expectations in the U.S., and with the Federal Reserve meeting coming up on November 1, investors are looking for hints on how interest rates might shift.
Away from Bitcoin’s immediate price action, the Grayscale Bitcoin Trust (GBTC) is showing signs of resurgence. For the first time since December 2021, the discount on GBTC has shrunk significantly. Earlier this year, it was close to 50%. This marks a renewed institutional interest in Bitcoin, spurred by Grayscale’s recent legal victories against U.S. regulators. Market participants are growing increasingly hopeful about the approval of a Bitcoin spot price ETF, especially as GBTC evolves. However, the U.S. Securities and Exchange Commission is also examining other ETF proposals, creating an added layer of uncertainty.
Record-Breaking Mining Difficulty
Finally, let’s talk about the miners who make the Bitcoin world go round. Bitcoin’s network is bracing for its third-largest difficulty hike this year. Forecasts indicate that the difficulty level could expand to a new all-time high, crossing the 60 trillion mark for the first time.
This creates a challenging environment for miners, calling into question their profitability as operational costs continue to rise. With a block subsidy halving event scheduled for next year, which will cut miners’ BTC rewards by 50%, the pressure is on for Bitcoin prices to rise.
October usually spells good news for Bitcoin, but this year is keeping everyone guessing. While Bitcoin is up 3.5% since the start of the month, it’s still the weakest performance for October since 2018. Historical data also shows that the worst October on record, which was in 2014, saw Bitcoin lose 12%.
With two weeks to go before the month ends, anything could happen, leaving us to wonder: Will “Uptober” live up to its name or leave investors yearning for a better November?