Analysts believe it is possible for Bitcoin to now potentially target $95,000 or even $120,000. Meanwhile, CoinShares pointed out that MicroStrategy’s ambitious Bitcoin buying strategy could face some risks tied to financing costs and stock dilution. Bitcoin’s mining sector also faces intensified challenges after difficulty recently reached record highs. Additionally, U.S. miners are competing with surging AI energy demands. This growing power competition could push U.S. mining operations to more remote areas.
Bullish Bitcoin Signals Pile Up
Bitcoin (BTC) is on a bullish trajectory, and was able to reach a big milestone on United States Election Day on Nov. 5 after it touched the $69,000 mark close to its 2022 all-time high. At press time, BTC was trading hands at $73,886, but market analysts suggest its path toward $120,000 is still strong.
CoinLupin, who is an analyst at CryptoQuant, pointed to the market value to realized value (MVRV) ratio as a key indicator of Bitcoin’s current momentum. Currently, the MVRV sits at 2, which implies that Bitcoin’s market value is twice its estimated on-chain value. This suggests a healthy bullish sentiment.
Bitcoin MVRV (Source: CryptoQuant)
The MVRV indicator also surpassed both its 365-day and four-year averages, which very often signifies an established uptrend in Bitcoin’s market cycle. According to CoinLupin, historical patterns suggest that a peak in Bitcoin’s price cycle tends to align with MVRV levels between 3 and 3.6.
Based on these metrics, the market will need an additional 43% to 77% increase for Bitcoin to reach targets between $95,000 and $120,000, should the realized value (RV) stay constant. With new buying interest entering the market, analysts expect that RV may continue to rise, and could potentially form a peak above these target levels, which has happened in previous bullish cycles.
In addition to the MVRV’s bullish signal, independent analyst Mags pointed out the Bitcoin hash ribbon triggered a “buy” signal, which is an indicator that is often associated with strong upward movements. This signal aligns with Mags’ earlier projections that saw Bitcoin trading around $67,915 with the potential to climb as high as $101,679 in the coming expansion phase.
Bitcoin’s in/out of the money around price (IOMAP) chart also revealed that it currently rests on robust support levels, with limited resistance on the upside. This setup suggests that BTC’s path of least resistance may indeed be upward.
CoinShares Warns of Risks in MicroStrategy’s Bitcoin Plan
Meanwhile, MicroStrategy’s very ambitious plan to buy an additional $42 billion worth of Bitcoin over the next three years comes with considerable risks, according to a CoinShares research blog. The company was founded by Bitcoin lover Michael Saylor,and it recently announced a $21 billion at-the-money stock offering to fund its growing Bitcoin portfolio. However, CoinShares analysts Alexandre Schmidt and Satish Patel pointed out that MicroStrategy’s ability to execute this strategy relies heavily on favorable financing conditions and sustained demand for its convertible notes.
MicroStrategy Bitcoin balance and premium to Bitcoin (Source: CoinShares)
MicroStrategy’s debt servicing costs are rising, which could create some potential challenges. While the company previously raised funds through zero-coupon convertible bonds, current coupon rates increased, making new issues more costly. CoinShares warned that the company’s dependence on its Bitcoin holdings adds another layer of risk, as any decision to sell Bitcoin could impact its valuation premium. Despite these risks, Saylor is still very committed to holding Bitcoin long-term. He even famously called it “the exit strategy.”
The CoinShares report also shed some light on potential tax implications, especially if the firm is taxed on unrealized gains from its Bitcoin holdings. MicroStrategy’s Bitcoin strategy overshadowed its core software business, and the report noted that cash flow from legacy operations could be insufficient to cover future coupon payments.
Even with potential shareholder dilution due to the large stock offering, Wall Street is still optimistic. Canaccord, a major brokerage, recently praised MicroStrategy as one of the best options for equity investors who are looking for Bitcoin exposure. As a result, MicroStrategy’s stock surged over the past few days.
Bitcoin Mining Difficulty Hits New High
Bitcoin’s mining difficulty reached a new peak of 101.65 trillion this past Monday, which intensified challenges for smaller miners who lack the financial resources of their publicly traded counterparts. Mining difficulty measures how hard it is to uncover new blocks on the Bitcoin blockchain, and it adjusts every 2,016 blocks, or approximately every two weeks.
So far this year, difficulty adjusted 23 times. Almost 60% of those adjustments were positive, which made it increasingly challenging to produce a block. This higher difficulty level adds pressure on the mining sector, especially smaller companies that may need to sell their Bitcoin production to fund operations.
Bitcoin mining difficulty change (Source: Glassnode)
At the same time, Bitcoin’s hashrate recently hit a record high, averaging 755 EH/s over the past week. This metric reflects the computational power that is required to mine and verify transactions. It surged by almost 12% in a single day at the end of October, which was one of the largest increases this year, according to Glassnode data.
On average, miners are currently spending 100% of their mined Bitcoin supply, with brief periods of retention in October after larger sales in August and September. Miners are currently producing around 450 BTC per day, equating to roughly $31.5 million if sold entirely. This then also contributes to market sell-side pressure. However, miners’ relatively balanced spending patterns signal that the sector is still in somewhat of a stable position. Lower spending from mined supply can help reduce downward pressure on Bitcoin’s price, which suggests that miners are navigating the high-difficulty environment with impressive resilience.
AI Outbids Bitcoin Miners in Growing Power Struggle
Network difficulty and hashrates are not the only challenges Bitcoin miners are facing at the moment. A recent decision by the U.S. Federal Energy Regulatory Commission (FERC) to block Amazon’s proposed AI data center from accessing power from Pennsylvania’s Susquehanna nuclear plant shed some light on the growing competition for electricity in the industry.
The rejection revealed some of the challenges miners are facing when it comes to meeting the energy demands of rapidly expanding AI operations, which, according to Bitcoin mining expert Jaran Mellerud, are aggressively looking for high-power locations across the U.S. and other developed countries. With AI generating far higher revenue per kilowatt-hour than Bitcoin mining, these tech giants can easily outbid miners for electricity, which is a trend Mellerud believes will continue to push Bitcoin miners to less accessible regions with lower infrastructure standards.
Mellerud predicts that this will have a major impact on the U.S. Bitcoin mining industry. He even expects the national share of global hash rate to fall from 40% to below 20% by 2030 as mining shifts to more remote regions. The Bitcoin Policy Institute (BPI) also noted that the energy needs of AI likely surpassed those of Bitcoin mining, Projections show AI’s power usage will hit 240 TWh by 2027, compared to an estimated 160 TWh for Bitcoin.
US data centers, Bitcoin miners, and AI energy use (Source: Bitcoin Policy Institute)
The race for power has led AI-focused companies to make major procurement moves, adding even more pressure on Bitcoin miners. AI operations yield up to 25 times more revenue per kWh than Bitcoin mining, which pushed some mining centers to add AI processing to their facilities or even pivot fully to AI. However, Bitcoin miners still face limitations in this transition because of their specialized hardware, which is built exclusively for mining Bitcoin and cannot be repurposed for AI tasks.
