Whether Bitcoin can reach $70,000 depends on lower interest rates, the outcome of the U.S. election, growth in BTC miner profits, and strong demand for spot ETFs.
Bitcoin rose by 3.8% from October 23 to October 25, reaching $67,144, but faced resistance at $68,700. Is there enough bullish momentum to push the price to around $70,000? Although the recent interest rate cuts from the Fed have increased investor risk appetite, pushing Bitcoin above the $70,000 threshold may depend on four main driving factors.
Limiting factors include global economic uncertainty, concerns over high mining sales pressure and low hash rate profitability, potential impacts of the U.S. election results on regulation, and the large reserves of Bitcoin held by exchanges.
In the context of global economic uncertainty, investors are adopting a cautious attitude. Despite Bitcoin becoming one of the top 10 assets in global market capitalization, alongside giants like TSMC, Berkshire Hathaway, Tesla, and Walmart, investors still have reasons not to go 'all in'. The returns on traditional assets are stable, with fixed income yields at 4.7%, thus the motivation to switch to Bitcoin remains limited. As a result, investors may choose to wait for more signals from the broader market before determining a target price of $70,000.
The upcoming U.S. presidential election has intensified this uncertain sentiment. Leading candidate Vice President Kamala Harris has expressed a preference for a highly regulated market, focusing on protecting individual investors. This position sharply contrasts with former President Donald Trump's more constructive view on integrating digital assets into traditional finance, which could affect the adoption trajectory of Bitcoin.
Selling pressure from Bitcoin miners and on-chain activity
Concerns also stem from Bitcoin's mining industry, which is struggling with profitability amidst headwinds. The hash rate index (a measure of mining revenue potential) has dropped to near historical lows, at $49 per 10 trillion hashes per second (PH/s), a decrease of about 50% since the halving in April. This decline highlights the financial pressures faced by miners, who are crucial for ensuring network security, and their movements may affect Bitcoin's price dynamics as they adjust their operational strategies.
Given that miners hold over 1.8 million BTC (equivalent to about $12.24 billion), many traders are concerned that these entities may be forced to sell off large amounts.
In a recent interview with Bloomberg, Luxor Technology COO Ethan Vera stated that
"You will continue to see negative profits, as they mask how bad the current industry is and how poor their operations are by diluting shareholder equity."
On-chain data does not provide much comfort, as Bitcoin's 7-day average active addresses have remained relatively unchanged over the past six months. This trend reflects a stagnation in Bitcoin adoption, similar to the stagnation in Google search volume for Bitcoin, indicating limited growth in public interest.
Accumulation of spot Bitcoin ETFs and exchange deposits
Some analysts expect that significant accumulation through spot Bitcoin exchange-traded funds (ETFs) could trigger a 'supply shock'. However, this view does not fully account for the large BTC deposits in exchanges, which remain high. Current estimates range between 1.9 million to 3 million BTC, depending on the custodial activities of companies like Coinbase.
Even if spot ETFs continue to accumulate at an ambitious scale of $2 billion monthly, there remains at least $12.92 billion available in foreign exchange reserves. Predicting the exact price that would trigger large-scale sell-offs remains challenging. However, it is conceivable that more BTC could enter exchanges, with some ETF holders possibly choosing to sell their positions after realizing significant gains.
Traders need to consider various factors, including lower interest rates, improved mining profitability, and strong ETF accumulation, before having enough confidence to increase Bitcoin positions and push prices above the $70,000 threshold.
