Biggest Mining Difficulty Increase in 14 Months – 5 Things to Know in Bitcoin This Week

Bitcoin (BTC) begins another week still below $20,000 – one that promises to give traders the excitement they’ve been looking for.

After another very similar weekly close, BTC/USD is still waiting for the breakout from its multi-week trading range.

The move has been a long time coming, but so far the market has lacked the catalyst to make it happen – support and resistance zones have been unchallenged.

This week, everything could change – the list of economic data to be printed in the coming days is impressive, while geopolitical instability is gathering pace in Europe as the conflict between Russia and Ukraine escalates.

At the same time, Bitcoin will show its bear market intentions as the time approaches when historically macro price bottoms are formed.

Meanwhile, the bulls are coming from inside sources, with network fundamentals set to make a giant leap higher on Wall Street’s first trading day of the week.

With so much to take in, Cointelegraph takes a look at the most important issues to keep in mind when planning one’s Bitcoin trading strategy in the coming week.

Volatility indicators rarely say price action is due

The weekend was smooth sailing for crypto market participants, data from Cointelegraph Markets Pro and TradingView show.

Despite the added potential for fakeouts thanks to reduced liquidity, the “after hours” status quo remained the same as previous days – limited movement within a known trading area.

The weekly candle, which came in just above $19,400, was no surprise either, although it was Bitcoin’s highest since mid-September.

Thus, on one-week time frames, BTC/USD continued to form a cluster of candles where the market hardly moved up or down at all – a classic sign that volatility will result.

That breakout event has already been predicted on lower time frames, these became reality on Friday when US jobs data triggered a short sell-off, costing bulls the $20,000 mark.

Now analysts are looking for a repeat performance over more significant periods.

“Very unusual to see Bitcoin pushed to historically low volatility levels on rising volume,” trader and entrepreneur Jordan Lindsey, told Twitter followers as the week ended:

“A big move up or down is coming.”

Lindsey was referring to a narrowing of Bitcoin’s trading range that comes as trading volume increases — the latter a key component of sustained breakouts.

This thesis is currently supported by the Bitcoin Historical Volatility Index (BVOL), a dedicated indicator for tracking volatility within its historical context.

Currently, BVOL at its lowest is only seen a handful of times over Bitcoin’s existence. A notable comparison is October 2018, just two months before the previous cycle’s bottom of $3,100.

“It has been below 36 level 2 times before and after that we saw a very big movement in the market,” trading account Crypto Vikings commentedadd:

“Currently it is below the 36 level again and that indicates a very big move is coming soon this month or most likely in November.”

William Clemente, co-founder of digital asset research and trading company Reflexivity Research, described The BVOL data as “worth noting.”

As such, any violent exit of the area can be both down and up.

Medkonto Livecoin nevertheless noted that BTC/USD has a historical habit of consolidating longer than the market wants when volatility is so low.

“Bitcoin hit levels of low volatility not seen in two years,” the trader and investor told Twitter followers on October 9, adding:

“While it is reasonable to expect a big move now more than ever, it is also important to note that there were two periods in the past when Bitcoin took more than 40 days to consolidate after reaching these levels.”

In the meantime, however, an eerie calm is perhaps the best description of the atmosphere surrounding Bitcoin.

As in summary by popular trader Matthew Hyland on the day, “Does this market have a pulse?”

September CPI entering hectic macro week

As for the broader economy, there are more than enough potential BTC price triggers going on this week.

Economic data releases will come thick and fast from October 12 onwards, and with tensions reaching new levels in the Russia-Ukraine war, shocks to commodity markets remain a curveball.

“This coming week is going to be a fun week: PPI, FOMC minutes, CPI, initial jobless claims and retail sales,” Clemente summed up.

Of particular interest, he addedwas the US consumer price index (CPI) print for September, due on October 13, which will form an important reference point for the Federal Reserve as it approaches another rate hike next month.

While the direction of CPI inflation based on past prints is probably less of a mystery, each print tends to produce unusual market volatility characterized by “fakeouts” both up and down.

Should this month repeat the trend, speculative trades both long and short could be liquidated en masse.

“Expect severe volatility to jump in with CPI and PPI,” Michaël van de Poppe confirmed in part of a recent Twitter post on the subject:

“Be ready!”

Outside the US, meanwhile, Europe is also in the spotlight with events in the Russia-Ukraine war reaching a new dimension in recent days.

Any sudden developments, especially those involving fuel, have the potential to stir further upheaval in traditional markets to which crypto is still correlated.

Difficulty prepares for biggest increase since August 2021

Internal developments in Bitcoin could form the basis for a surge in confidence as the week begins.

According to current estimates, Bitcoin’s mining difficulty is due to add a whopping 13% on October 10 – the largest since August 2021 – and could easily take it to new all-time highs.

The figures make for surprising reading. Such an increase suggests that miner competition is increasing as network participation increases – but BTC price action remains near two-year lows.

Miners will already have extremely slim profit margins, with production costs for many likely to be very close to the current spot price.

Increasing difficulties and thus financial obligations should therefore further pressure profitability, and increase the risk of miner capitulations.

“Bitcoin miners just won’t stop,” analyst Dylan LeClair wrote about the difficulty estimate last week.

By predicting where miners might start to run into trouble, analytics firm Glassnode pegged on-chain importance in the region of $18,000, thanks to the latest modeling techniques.

“Like the difficulty regression model, the price range between $17k and $18k has converged as an area that induced miner stress in June, and is consistent with a number of production cost estimates,” it wrote in the latest edition of its weekly newsletter, “The Week On -Chain.”

However, should a price drop occur, researcher Checkmate claimed that it is “extremely unlikely” that miners will sell their entire holdings, currently worth just under 80,000 BTC.

“This risk could manifest as a second phase miner capitulation, with around 78.4k BTC still held in the miner treasury. It is extremely unlikely that the entire amount will be distributed, but provides an upper limit to measure the potential risks at hand, concluded he.

Time for a BTC Price Bottom?

Looking back at when BTC/USD could bottom out in this bear market, Charles Edwards, CEO of asset manager Capriole, looked at cycles that have passed.

Joining Clemente this weekend, Edwards noted that in both 2018 and 2014, Bitcoin posted a macro bottom within a set period after the previous new all-time high.

The time for history to repeat itself is here, and is only three months long.

“We are in the 90-day window where the last 2 Bitcoin cycles bottomed out,” he confirmedwhich refers to Clemente’s chart comparing distances between Bitcoin’s all-time highs and subsequent macro lows.

The lowest price may still be far away when it comes to price. At $19,400, BTC/USD is 71% below its recent peak – down from 2018.

Even June’s low of $17,600 represents a 74.5% reduction – not enough to match previous cycles.

“Either we fall soon or this time is different,” Maartunn, a contributor to the chain analysis platform CryptoQuant, speculated in research last month.

Sentiment data copies bears gone

Looking at the will of the herd, it appears to be very much “business as usual” in this Bitcoin bear market.

Related: Crypto traders shift focus to altcoins as Bitcoin price consolidates

According to the popular market gauge Crypto Fear & Greed Index, “extreme fear” still reigns supreme in crypto – as it has for much of 2022.

With a score of 22/100, Fear & Greed has been in its lowest zone for several weeks. Earlier in the year, it saw its longest ever “extreme greed” stint of more than two months.

Nevertheless, for the popular trading resource Stockmoney Lizards, there is nothing to see here – everything is going to plan this time compared to previous Bitcoin halving cycles.

“In terms of timing, this current cycle is very similar to the last,” it declared on the day next to a comparative chart:

“This chart is descriptive only, but depicts the repetitive nature of Bitcoin sentiment phases very well.”

The trough to the last “red” bottom may then be the next major cycle function.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trade involves risk, you should do your own research when making a decision.