Recent reports indicate that institutional investors are showing significant demand for Bitcoin (BTC) through spot BTC Exchange Traded Funds (ETFs), which has raised concerns about miners’ ability to restore market equilibrium. Market data shows that spot BTC ETFs received an inflow of $423.6 million (4,349.7 BTC) in the past week, nearly double the 2,250 BTC mined during the same period.
Furthermore, it has been reported that spot BTC inflows have reached an astonishing $5.5 billion, highlighting the unprecedented institutional demand amidst recent liquidity. Looking at historical data, we can see that an $817.5 million ETF inflow was recorded in the second week of November when Bitcoin’s price dropped by 3% to $86,855. BlackRock’s IBIT accounted for $778.3 million of this inflow, followed by Fidelity’s FBTC with $37.2 million.
Analysts believe that the mismatch between ETF inflows and miners’ production has created a liquidity squeeze, making the asset vulnerable to price sensitivity. On the positive side, continued demand from institutional investors, combined with declining miners’ production, could lead to a significant surge in the price of Bitcoin. Conversely, if institutions sell off a large portion of their holdings, the price could experience a sharp decline.
When analyzing the reasons for this imbalance, we found that daily block reward gross profit declined by 2% in October. JPMorgan research shows that miners earned $41,800 per hour per second (EH/s) in daily block reward revenue. Additionally, in Q3 2024, Riot Platforms, the third largest Bitcoin mining company on Wall Street, reported a substantial loss in revenue, increasing from $80 million to $154.4 million compared to the same period last year. This was attributed to the cost of mining one Bitcoin, which stood at $35,376, as well as the impact of the Bitcoin halving event in April, which reduced the mining reward by half, and the increasing network difficulty and reduction in power credits.
Despite these challenges, Riot recorded $84.8 million in revenue this quarter, representing a 65% increase compared to the same quarter in 2023. This growth was driven by a 159% year-over-year increase in deployed hash rate, allowing them to produce 1,104 Bitcoin this quarter, in line with their production in Q3 2023.
Currently, Bitcoin is trading at $95.9k, experiencing an 8% decline in the past seven days. Analysts, such as Rekt Capital, suggest that Bitcoin may be entering a multi-week correction phase, with week eight typically being a corrective week. In 2017, week nine followed a similar trend but to a lesser extent.
Director of trading at liquidity provider Arbelos Markets, Sean McNulty, also believes that if Bitcoin falls below the $90k level, we could see further liquidation of the asset.
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