Mining Difficulty Rises Most in 14 Months - 5 Things to Know About Bitcoin This Week

Bitcoin started the new week with prices still below $20,000.

After another very similar weekly close, BTC/USD is still waiting to break out of its weeks-long trading range.

This move has been a long time in the making, but so far the market lacks the catalysts to make it happen - support and resistance zones remain unchallenged.

This week, that could all change - there is an impressive array of economic data due out in the coming days, and geopolitical instability in Europe is increasing as the conflict between Russia and Ukraine escalates.

At the same time, bitcoin is set to show its bearish intent as the time for a historical macro price bottom to form approaches.

The silver lining for the bulls comes from within, with the network fundamentals set to move sharply higher on the first trading day of the week on Wall Street.

With so many factors to consider, Cointelegraph summarizes the key issues to keep in mind when planning a bitcoin trading strategy for the week ahead.

Volatility Indicators Point to Rare Price Moves

Data from Cointelegraph Markets Pro and TradingView show that it was smooth sailing for crypto market participants over the weekend.

While reduced liquidity increased the likelihood of a crash, the status quo "outside of official trading hours" remained similar to previous days - with limited volatility within familiar trading ranges.

Bitcoin closed the week slightly above $19,400, which is not surprising despite being the highest close for Bitcoin since mid-September.

There was little upside or downside in BTC/USD over the week's timeframe, a typical sign of the volatility that will be generated.

This event had already been predicted on a lower time frame and the prediction has become a reality on Friday as the US jobs data triggered a brief sell-off and the bulls lost the $20,000 mark.

Now, analysts are looking for the possibility of a repeat of this performance in a more important period.

Jordan Lindsey, a trader and entrepreneur, told his Twitter followers at the end of the week, "It's unusual to see bitcoin squeezed at historically low volatility levels amid rising trading volume."

Lindsey was referring to the fact that the narrowing of bitcoin's trading range has coincided with a rise in trading volume, which is a key factor in the continued breakout.

This view is now supported by the Bitcoin Historical Volatility Index (BVOL), an indicator that specifically tracks volatility in the context of Bitcoin history.

Currently, BVOL is at one of only a few lows since Bitcoin's inception. A notable comparison is October 2018, just two months after the previous cycle's bear market bottom of $3,100.

Trading account Crypto Vikings commented, "There have been 2 times in the past where it fell below the 36 level, after which we saw very large swings in the market."

William Clemente, co-founder of digital asset research and trading firm Reflexivity Research, called the BVOL data "noteworthy.

However, another Twitter account, Livecoin, noted that when volatility is this low, BTC/USD has been consolidating for longer than the market expects, which is a historical habit.

On Oct. 9, the trader and investor told fans on Twitter, "Bitcoin volatility is at a low level not seen in two years."

At the same time, however, an eerie calm perhaps best describes the Bitcoin atmosphere.

As noted trader Matthew Hyland summed up the day, "Does this market have a pulse?"

September CPI to be released in a busy macro week

As for the broader economy, there are more than enough potential bitcoin price triggers taking shape this week.

Economic data will be released from October 12 onwards, and the impact on commodity markets continues to catch people off guard as tensions over the Russian and Ukrainian wars reach new levels.

"The week ahead will be interesting: PPI, FOMC minutes, CPI, first-time jobless claims and retail sales," Clemente concluded.

He added that of particular interest is the U.S. Consumer Price Index (CPI) data for September to be released on Oct. 13, which will be the main reference point for the Fed's upcoming rate hike again next month.

Although the direction of CPI inflation may be less mysterious based on previous data, but each time the data tends to produce unusual market volatility.

If this trend repeats itself this month, speculative trades on both the long and short side could be heavily liquidated.

"Expect CPI and PPI to lead to severe volatility," Van de Poppe confirmed in his latest tweet on the topic.

Meanwhile, outside the U.S., Europe has also become a focus of attention, with developments in Russia and the war in Ukraine reaching new heights in recent days.

Any unexpected events, especially those related to fuel, have the potential to spark additional turmoil in the traditional markets to which cryptocurrencies are still linked.

Mining difficulty hike expected to be largest since August 2021

As the week begins, internal developments in Bitcoin could form the basis for a spike in confidence.

According to current estimates, bitcoin's mining difficulty will be revised upward by a whopping 13 percent on Oct. 10 - the largest increase since August 2021, enough to easily push it to a new all-time high.

These numbers are surprising. Such an uptick suggests that competition among miners is intensifying as participation in the Bitcoin network increases - however, Bitcoin price action is still near two-year lows.

Profit margins for miners have become extremely slim, and many miners' production costs are likely very close to the current spot price.

The increased difficulty and financial burden should further squeeze profitability and raise the risk of miners capitulating.

Analyst Dylan LeClair wrote last week on the difficulty estimates, "Bitcoin miners just won't stop."

Meanwhile, on-chain analytics firm Glassnode is using the latest modeling techniques to put importance in the region of around $18,000,000 when it comes to predicting where miners might start to struggle.

The company writes in its latest edition of its "Weekly On-Chain Report," "Similar to the difficulty regression model, the price range between $17,000 and $18,000 matches the area that triggered miner stress in June and is consistent with many production cost estimates. "

However, researcher Checkmate believes the likelihood of miners selling their entire inventory, which is currently valued at just under 80,000 BTC, is "extremely low" if prices fall.

"This risk could manifest itself as a second stage of miner capitulation, with some 784,000 bitcoins sitting in miners' coffers. It is highly unlikely that this amount will be sold, but it is an indicator about the upper limit of potential risk," he concluded.

Is it time for the bitcoin price to bottom out?

Charles Edwards, CEO of asset management firm Capriole, examines past cycles and once again sets his sights on when BTC/USD will bottom in the current bear market.

Edwards notes that in both 2018 and 2014, Bitcoin saw macro bottoms for a fixed period of time following its previous all-time highs.

So the time for history to repeat itself is here, and it's only three months away.

"We are in the 90-day window where the last two bitcoin cycles bottomed," he confirmed, citing Clemente's chart comparing the distance between bitcoin's all-time highs and subsequent macro lows.

However, that low may still be far away in terms of price. btc/usd is currently at $19,400, 71% below its last peak - and lower than in 2018 by comparison.

Even the June low of $17,600 implies a 74.5% drop - not enough to compare with previous cycles.

Maartunn, a contributor to the on-chain analytics platform CryptoQuant, speculated in last month's study that "either we're going to hit bottom soon, or this time it's different."

Sentiment Data Replicates Past Bear Markets

This bitcoin bear market appears to be "business as usual" in terms of crowd sentiment.

According to the popular market indicator, the Cryptocurrency Fear and Greed Index, "extreme fear" still dominates the cryptocurrency space - as it did for most of 2022 as it has for most of 2022.

With a score of 22/100, the Fear and Greed Index has been in its lowest territory for several weeks. Earlier this year, it experienced its longest period of "extreme greed," lasting two months.

Nonetheless, popular trading resource Stockmoney Lizards believes this says little - that everything will go according to plan this time around, compared to previous Bitcoin halving cycles.

"In terms of timing, the current cycle is very similar to the last one," it said that day alongside a comparison chart.

Then, the latest "red" zone could be the next major cyclical feature.

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