Macroeconomic trends in the United States and the increasing difficulty of mining the digital currency could threaten the price of Bitcoin in the near future.
You’ve probably noticed that Bitcoin has been trading between $18,000 and $24,000 for several months. However, several experts believe that this situation could soon change. There are a number of factors that could affect the value of bitcoin.
Macroeconomic phenomena: inflation, unemployment, and rising interest rates
On the one hand, there are macroeconomic phenomena, such as inflation or unemployment in the United States. For example, the value of bitcoin fell to $19,333 on Friday when the monthly U.S. jobs report showed that the unemployment rate had fallen to 3.5%.
Ilya Yelchanin, an analyst at TradingView, told the BRC portal that the market could also react violently to the release of US inflation data due on October 13. If inflation continues to rise, crypto-currency prices will fall, and vice versa.
The point is that such events can help predict further changes in U.S. Federal Reserve interest rates, which will rise again if inflation rises or unemployment falls. The flow of liquidity in the crypto-currency markets depends on the level of interest rates.
“Crypto-currencies have been the most affected by rate hike fears this year,” says Callie Cox, an investment analyst at eToro quoted by CNBC. She explains that many crypto-currency projects only have the ability to generate profits in the future, not now. That’s why they rely heavily on the future value of money. “When rates go up, the future value of a dollar goes down,” he concludes.
Bitcoin price and increasing difficulty of mining
In addition, the other potential problem with bitcoin is the recent increase in the difficulty of mining the currency. In general, difficulty is a factor in determining the cost of bitcoin mining.
The higher the difficulty, the less profitable the mining activity. And the fact is that it has increased recently and is likely to increase again, reports crypto-currency portal Cointelegraph. The current dynamics could make mining unprofitable, which could lead to a further decline in prices.
However, Joe Burnett, chief analyst at Blockware Solutions, said that mining activity isn’t really going to slow down, at least not without a significant drop in bitcoin’s price due to other factors. “I think the little miner capitulation that bitcoin has seen this summer has put some weak and overleveraged players out of business,” he said.
All of this is without mentioning the bad image of Bitcoin, as it pollutes more than beef production and consumes more electricity per year than Austria or Portugal.
In these conditions, it is very useful to use a free or paid crypto trading signal provider: It is a set of simple instructions sent by a group of traders or experts to a subscriber to tell him what crypto currency to buy or sell, at what price to set the stop-loss, according to technical analysis and market data.