mining and ETF the cause

There are no particularly good forecasts circulating about the price of Bitcoin, mainly due to concerns regarding mining. 

However, it is necessary to distinguish between short-term forecasts and medium/long-term forecasts. 

The collapse of the Bitcoin price: negative forecasts on the horizon, mining and ETFs are the cause

The price of Bitcoin yesterday lost 4%. 

Compared to a week ago it is now down by 4.7%, and compared to a month ago by 7%. 

In particular, yesterday the US stock markets reopened after the weekend and the Monday holiday, and they did so with heavy losses. The S&P500 index, for example, fell by 2% in a single session. 

All this ended up weighing on Bitcoin, which before the reopening of the US stock markets was above $59,000, and by their closing had already dropped to $57,500. However, the decline continued, particularly with a sudden drop to $55,500 just before the opening of the Chinese stock markets.

Today, for example, the Japanese stock market in Tokyo has even lost 4%, so it is likely that the Asian markets have brought down bitcoin. 

Subsequently, the decline then stopped, both on the Asian stock exchanges and on Bitcoin. 

This drop in BTC might seem like a crash, but in reality, it probably isn’t.

It is true that it fell below the support of $57,000, touching the support at $55,000, but it is also true that from July 29 to August 5, practically a month ago, it went from $70,000 to less than $50,000 in a few days. A drop from $59,000 to less than $56,000 in one day is not exactly a crash, after what happened a month ago. 

The short-term forecasts

In the short term, the forecasts are not positive. 

Since the support at $57,000 did not hold, one might expect a return to $55,000, or even to those $50,000 touched at the beginning of August. 

At this moment the price of BTC has returned above $56,000, but this does not seem to be a sufficiently strong safety zone.

The main problem at the moment seems to be the sales of miners. In theory, the April halving should have reduced them, but instead, miners are selling more than expected because they are also depleting the NTC they have accumulated over the past years, just to survive.

The problems of Bitcoin mining: unleashed negative forecasts on the price of BTC

In fact, in the face of a strong and sudden drop in revenues, which inevitably came with the halving, there was not an equally strong drop in costs, because the difficulty and the hashrate remained high.

They are struggling to survive, and some of them certainly won’t make it. In order for this period of waiting for their capitulation to end, it is necessary to wait for someone to raise the white flag. 

Obviously not everyone will close, and indeed it is sufficient that only a few close to make mining profitable again. 

According to the estimates of BitInfoCharts, the profitability of mining has plummeted from $0.1 per day per THash/s in March to the current $0.04, due to the halving on one side, and the still too high hashrate on the other.

It should be remembered that Bitcoin does not need all this hashrate to survive, and that it is solely an autonomous and arbitrary choice of the miners to keep it so high. The fact is that miners earn more the more hashrate they use, but this also raises operating costs. Since revenues have strongly and inevitably decreased with the halving, maintaining more or less unchanged costs is an apparently suicidal choice, and this is why it is very likely that some miners will close, putting an end to this problem. 

The medium-term forecasts

However, things change if the perspective is extended. 

First of all, sooner or later some miners will start to capitulate, when they have exhausted their reserves of BTC to sell, and this will reduce the hashrate, increasing the profitability of mining. When this happens, the sales of miners will necessarily also decrease. 

Furthermore, October has often been a positive month for Bitcoin, and the markets might already start pricing in the potential rise following the American elections, something that has always happened in all past cycles so far. 

Finally, in a couple of weeks, the Fed will cut rates, and this could slightly increase liquidity. 

The recent performance of spot Bitcoin ETFs

It should not be forgotten that since January Bitcoin has been indirectly present on the USA stock exchanges. 

Yesterday, at the reopening of the markets, in just one day the ETFs on Bitcoin recorded almost 290 million dollars of outflows, which were added to the 175 million from Friday. 

This means that the managers of Bitcoin ETFs were forced to sell BTC, thus further increasing the selling pressure. 

This type of ETF, however, is always by its very nature of short duration, because it can vary from day to day. For example, last Monday there were inflows of 200 million dollars. 

So the situation in the short term is fluid and apparently not optimistic, but in the medium term it is a whole different thing.