Dispatch #208: The October Optimist

The Mining Difficulty ⛏️

The Big Idea

Bitcoin’s Macro Class Continues

Last month, we documented a significant correction when Bitcoin briefly fell below $55,000. Now, we’re witnessing a similar scenario: unfavorable macroeconomic data → market-wide sell-off → recent gains gone.

With Nexo’s Kristian Haralampiev sharing his detailed outlook with Decrypt, we are eager to know if a turnaround is imminent. Here’s the low-down:

The Correction: Bitcoin dropped 10% this week due to economic concerns and a pause in the dollar’s weakening, extending its bearish run (-13% in July and -16% in August). On the bright side, there are two potential bottom indicators: a 12% drop in open interest (OI), suggesting short traders’ exit, and reduced liquidations.

This Week: Key U.S. economic reports, including nonfarm payrolls, ISM services PMI, and jobless claims, will influence the Fed’s interest rate decisions. Bitcoin’s price recovery hinges on whether these reports lead to rate cuts, which could weaken the dollar and boost BTC. Technical indicators show a bullish divergence, with Bitcoin likely to find support between $54,500 and $55,500.

The Outlook:

October has historically been bullish for Bitcoin, with positive returns in eight of the last nine years.
$80,000 strike price call options suggest trader optimism for a year-end rebound.
Technically, Bitcoin faces resistance at $59,914 and $61,144, with reduced downside risk below $49,000.
A bullish RSI divergence points to a potential relief rally, contingent on upcoming economic data and Fed policies.

The takeaway: Let’s get the macroeconomic data first and the Bitcoin candles could follow.

The Latest In…

Ethereum ETFs: Time for a Turnaround?

Spot Ethereum ETFs faced a tough first month, with $476M in outflows since July 23. Despite this, analysts remain optimistic:

Outflows are likely temporary, says Bloomberg’s Eric Balchunas, and expected to improve as Grayscale’s asset unlocks impact decreases.
BlackRock CEO Larry Fink’s emphasis on Ethereum’s tokenization potential may boost institutional interest.
While warnings about short-term declines and September’s historically bearish trends are concerning, the long-term outlook remains positive due to potential market stability and renewed investor confidence.

The Latest In…

Cardano’s Turn to Governance

Cardano has launched its “Chang” upgrade, moving towards decentralized governance. As a result, ADA holders can now vote on proposals and elect representatives as this replaces control previously held by Cardano’s founders. The upgrade makes Cardano one of the largest layer-1 blockchains with on-chain governance, advancing its decentralization goals.

The Latest In…

The Beauty of Blockchain Finance

Siemens AG has issued a $330M digital bond as part of the European Central Bank’s trial. Major banks BayernLB, DekaBank, and Deutsche Bank participated in the issuance, which settled on SWIAT – a private blockchain. The settlement was completed in minutes, faster than Siemens’ previous €66M Polygon-based bond.

Key takeaways:

Demonstrates blockchain’s potential for efficient financial transactions.
Part of a broader trend of tokenizing real-world assets (RWA).
Signals growing institutional interest in blockchain technology for financial instruments.

The Latest In…

BTC Miners Don’t Have it Easy

Bitcoin mining profitability plunged to an all-time low in August, with miners earning just $43,600 per EH/s in daily block rewards, JPMorgan reports, down from $342,000 in November 2021. This decline stems from:

Bitcoin’s price drop (third consecutive month).
Rising network hashrate (631 EH/s average, up 16 EH/s from July).
9% increase in mining difficulty.

Is a higher Bitcoin price on the horizon to alleviate miner pressures?

The Week’s Most Interesting Data Story

Inside Bitcoin Block Production

Just a few more words on mining difficulty. Bitcoin’s mining landscape has seen notable shifts recently. At the end of August, difficulty rose by nearly 3%, making block discovery tougher. Despite a slight drop in Bitcoin’s price, miners have managed to boost revenue per petahash, reaching $41.69. The hashrate has also climbed to 665 EH/s, nearing its all-time high, reflecting miners’ adaptability.