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(Kitco News) – Volatility is on the rise in the crypto market as Bitcoin’s (BTC) price wicked down in the early hours on Tuesday, only to be bid back up by bullish dip buyers looking to help prevent a deeper sell-off.
While its price continues to consolidate following last week’s breakout to $38,000, data provided by CoinWarz shows that the Bitcoin network hashrate and mining difficulty continue to hit new all-time highs. The spike has been attributed to a ramp-up in activity from miners who are looking to get as much use out of their machines ahead of the next Bitcoin halving, which will take place in April 2024.
Many mining machines become unprofitable after a halving transpires because the event cuts the newly-issued Bitcoin supply in half, effectively reducing mining profitability. Eventually, the BTC price rises to offset the decrease in output, but a large number of miners are forced to turn off older machines in the meantime as they cost more to operate than they earn.
According to Matteo Greco, a research analyst at Fineqia International, “During Q3, power-strategic miners managed to reduce their average direct BTC production cost by 35%, from $21,100 to $13,800, as reported by BitVeria. This data underscores a considerably stronger profitability in the mining sector compared to the challenges experienced throughout 2022 and part of 2023.”
As to the rise in volatility, Greco said it has been climbing since last week when Bitcoin oscillated between $34,800 and the weekly close of $37,350, largely due to traders engaging with the altcoin market as BTC’s price traded sideways.
BTC/USD Chart by TradingView
“BTC dominance, which gauges Bitcoin’s market capitalization in relation to the entire digital asset market, rebounded after two consecutive weeks of decline, settling at approximately 52.6%,” Greco said. “This represents a 0.3% increase compared to the prior week, indicating a deceleration in the dispersion of liquidity across the market following two weeks of robust momentum in the altcoins sector.”
“The recent increase in altcoins’ performance is corroborated by an analysis of the Total3 metric, considering the total market capitalization of the top 125 altcoins,” he said. “This metric presently stands at around $416.1 billion, marking the highest level recorded since August 2022.”
Total3 1-day chart. Source: TradingView
“It underscores the substantial positive momentum in the overall market, following a robust surge led by Bitcoin and the ETF Spot narrative in recent months, bringing the market capitalization close to levels not observed since the UST-Luna collapse that triggered a significant downturn in early May 2022,” Greco said.
He noted that “about 80% of the addresses holding Bitcoin are in profit, illustrating the robust accumulation during the 2022 downturn,” while “Only roughly 20% of addresses have an average purchase price exceeding $37,000, affirming the high probability of a bottom being formed during 2022.”
“This accumulation by long-term holders from short-term holders is typical in the latter stage of a bear market, where cycle bottoms are established,” he said. “This is further supported by the BTC supply that has not moved in the last 12 months, currently accounting for 70.2%, indicative of the long-term commitment of most investors.”
Greco also provided insight into the on-chain activity for Bitcoin, which shows a building positive trend.
“Daily transactions, calculated on a 7-day average, approached almost 575,000, and the total volume of BTC on-chain transactions is at levels not witnessed since the end of June,” he said. “Transaction fees remain relatively high at $4 to $5, showcasing an overall uptrend in on-chain activity, extending beyond centralized exchanges and financial products. This suggests a harmonious growth in structural activity and interest across various investor cohorts.”
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
