Bitcoin Mining Difficulty Hits Record Highs as ETF Demand Surges

With competition heating up and Bitcoin holding steady near its all-time highs, the industry faces new pressures. Now miners need even more computational power to keep pace, leading to higher costs and potentially straining the system's sustainability.

Rising Bitcoin prices and surging ETF demand are putting a strain on crypto miners. As demand rises, so does the competition, driving up mining costs and putting pressure on profits.

Fresh data from CryptoQuant reveals that over-the-counter (OTC) desks have maintained record-high Bitcoin supplies throughout 2024. Compared to H1, where OTC holdings ranged from 183,000 to 193,000 BTC, available supplies have more than doubled.

As of October, OTC desks held an average of 416,000 BTC, with the lowest and highest points being 393,000 BTC and 444,000 BTC on January 1 and December 15, respectively.

CryptoQuant's analysis shows that ETFs have been making large-scale purchases of Bitcoin from OTC desks to meet surging demand. However, these purchases, which now account for 1% to 2% of OTC inventories, pale in comparison to H1.

During that period, daily ETF buys constituted up to 12% of OTC inventories. For a more substantial impact on OTC supplies, ETFs would need to ramp up demand significantly.

CryptoQuant also observed a shift in OTC desk dynamics, with overall Bitcoin balances no longer surging like they did earlier this year. During H2, their stockpiles rose by a total of 10K BTC, compared to increases of over 77,000 BTC and 92,000 BTC in August and June, respectively.

Slipping into the final stretch of 2024, OTC desk balances only rose by 3,000 BTC over the last month. Lower daily Bitcoin inflows to these desks are contributing to the slowing inventory growth.

From an average of 189,000 BTC year-to-date, inflows have dropped to around 90,000 BTC. This slowing supply may add upward pressure to Bitcoin's price if ETF demand remains strong.

U.S. election jitters hit Bitcoin prices as traders eye a possible retracement

As the U.S. presidential election approaches, Bitcoin trading activity reached new heights with open interest hitting records this week. After pushing toward an all-time high of $73,800, BTC prices stumbled.

This signaled that market players are feeling the strain, with some analysts predicting a possible price retracement before any serious gains resume. Crypto analyst Titan of Crypto spotted a local bottom at $66,200, questioning if a bounce might follow.

His chart showed Ichimoku cloud data for a one-day timeframe, highlighting a price dip below the Tenkan-sen trend line, suggesting BTC could still slide further.

“BTC couldn’t close above Tenkan, signaling a possible more profound pullback. If the breakout is confirmed, we might see a retest of Kijun around $66,200, which could mark a local bottom,” he said.

After posting a 10% gain in October and closing the month above $70,000 for the first time since March, BTC prices faced market jitters as the election days approach.

Observers noted that election uncertainty could trigger short-term volatility, while Bitcoin’s overall supply-demand dynamics remained bullish. Investors expressed mixed opinions on how each candidate might impact the industry.

“What’s driving price action is undoubtedly the election,” said Nic Puckrin, CEO at Coin Bureau, in a statement shared with traders on Friday.

“The markets will take their cue based on who wins the White House. Trump is widely seen as pro-crypto, although irrespective of who wins, BTC is still primed for a pump,” Puckrin added.

These election-related tensions are amplifying Bitcoin’s typical October-November rally. Historically, these months have been strong for the cryptocurrency, with Bitcoin closing higher in seven of the last eleven Novembers.

While investors prepare for post-election swings, some traders are betting that a Trump win could add 10%–15% to Bitcoin's price, while a Harris victory might cause a similar-sized dip.

This election season also overlaps with key milestones for Bitcoin. October marked six months since the last halving event, which halved the rate of new Bitcoin issuance. With supply tightening and demand increasing, some analysts believe Bitcoin is on the path to another record, though election volatility might be a stumbling block in the near term.