A lateral range of 18,763 - 20,381 has formed on the bitcoin chart, in which the main cryptocurrency is systematically decreasing, while maintaining a small margin to its lower border.
This week, the release of the FOMC minutes on Wednesday and the release of the inflation report for September on Thursday may shake the markets, including risky assets.
If inflation does not slow down, the dollar may receive support in anticipation of continued aggressive Federal Reserve rate hikes. Investors will run away from risk, and the main cryptocurrency can test the strength of the July lows.
In the meantime, we have a few days before the release of the data, let's see what is being discussed in the crypto community today.
Bitcoin cycle bottom - where is it?
The last bitcoin halving occurred on May 11, 2020, resulting in a block reward of 6.25 BTC. After a record drop in the global market in March 2020, the main cryptocurrency was trading at around $8,000 during the halving period.
Using a bitcoin value map, on-chain analysts found that the price when the block reward is halved matches the historical fair value. According to the analysis, if the fair value does not decrease significantly, bitcoin could reach around $40,000 in 18 months.
Another important element to consider in this scenario is the current macroeconomic environment.
Charles Edwards, CEO of Capriole Investments, looked at previous cycles to determine where bitcoin could end up bottoming out. Cryptocurrency analyst Will Clemente previously posted a chart comparing the distance between BTC's all-time highs and subsequent macroeconomic lows.
In both 2014 and 2018, bitcoin set a macro bottom after its previous new all-time high in a predetermined time frame. Referring to Clemente's timeline, Charles Edwards wrote:
"We are in a 90-day window where the last 2 cycles of the major cryptocurrency have bottomed out."
Bitcoin was trading at $19,400 at the time of these findings, down 71% from its all-time high of $64,000 set in November 2021, but still down from 2018, suggesting a downside opportunity.
The Key Role of $19,000 Support and Conditions for Growth
Another crypto analyst claims that the main cryptocurrency needs to stay at the $19,000 support level to avoid a sharp fall. At this price level, 1.3 million addresses have purchased over 680,000 BTC, and on-chain data shows that there is little to no support below this level.
CryptoQuant CEO Ki Young Ju believes that when a significant number of USDC stablecoins enter the exchanges, the next bull run of bitcoin could begin. This may indicate the emergence of "purchasing power" in the market.
According to him, 94% of the USDC supply is currently held by non-exchanges, some of which are owned by large companies such as BlackRock, Fidelity and Goldman Sachs.
However, crypto-currency stablecoins like BUSD are currently flooding exchanges, which could indicate that some cryptocurrencies are hoarding coins.
Mining difficulty has risen to a new all-time high
There is no bear market for the creators of the bitcoin network. More and more miners are joining the network, which increases the difficulty.
Following the hash rate hitting new highs, the difficulty adjustment, or the difficulty that BTC miners have to overcome to solve valid blocks, increased by 13.55%.
Despite pressure from falling prices in 2022, the difficulty correction continues to rise steadily from the August 2021 lows. On October 10, it reached an all-time high of 35.61t after a period in which six blocks were resolved in quick succession.
Mark Morton, CEO of Scilling Digital Mining, an Irish bitcoin mining company, explained that "the next difficulty adjustment suggests that miners are still finding enough profit to include new machines, and are likely to benefit from the sharp drop in machine prices".
Morton also mentioned that the increasing complexity and speed of hashing "has a very positive effect on the security of the bitcoin network. We are seeing a rapid increase in network security, even despite the fall in the price of the main cryptocurrency."
Difficulty adjustment occurs approximately every two weeks or 2016 blocks. Considering that the blocks were solved on average a little less than the target ten-minute interval, the difficulty adjustment increased. According to Braiins, a bitcoin mining tool company, the average time for the last 2016 blocks, known as an epoch, was only nine minutes.
Bitcoin miners adapt to the bear market
In the Bitcoin white paper, Satoshi Nakamoto explains that "if blocks are generated too fast, the difficulty increases."
The drastic price drop, combined with mounting hardships, could challenge miners who mismanaged their finances during the 2021 bull market. Indeed, during the bear market of 2022, threats of capitulation of miners were looming: some were forced to sell part of their assets in the summer.
Morton explained:
"Miners who assumed we would only have a growing market and were buying machines at inflated prices will certainly find themselves in a quandary."
Some of them have begun to look for ways to reduce costs, such as using waste heat to keep workplaces at a constant temperature.
Noting the increasingly creative ways in which miners are finding ways to channel unused energy sources and recycle miners' waste heat, Morton concluded that "competition between miners to find innovative and strategic energy sources bodes well for the future of the network as a direct source of energy". This means that dependence on the price of BTC is decreasing.
