The recent surge in demand for Bitcoin (BTC) from institutional investors through spot BTC Exchange Traded Funds (ETFs) has raised concerns about the ability of miners 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, almost double the amount of BTC mined during the same period.
In addition, reports indicate that spot BTC inflows reached a staggering $5.5 billion, highlighting the unprecedented institutional demand despite recent liquidity challenges. Looking at historical data, in the second week of November, an ETF inflow of $817.5 million was recorded when Bitcoin’s price had dropped by 3% to $86,855. It was reported that BlackRock’s IBIT led this inflow with $778.3 million, followed by Fidelity’s FBTC with an addition of $37.2 million within the week.
Analysts suggest that the mismatch between ETF inflows and miners’ production has created a liquidity squeeze, making the asset more sensitive to price fluctuations. On the positive side, if institutional investors continue to demand Bitcoin while miners’ production declines, it could lead to a significant price surge. However, if institutions decide to sell off a large portion of their holdings, it could result in a massive price decline.
Bitcoin mining revenue and profit have also experienced a decline. In October, daily block reward gross profit decreased by 2%. JPMorgan research shows that miners earned $41,800 per hour per second (EH/s) in daily block reward revenue. Riot Platforms, the third-largest Bitcoin mining company on Wall Street, recorded a substantial loss in revenue in Q3 2024. The loss increased 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. Experts believe that the Bitcoin halving event in April, where mining rewards were cut in half, along with increasing network difficulty and a reduction in power credits, contributed to these losses.
Despite these challenges, Riot reported $84.8 million in revenue for the quarter, 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, in line with their production in Q3 2023.
As of now, Bitcoin is trading at $95.9k, experiencing an 8% decline in the past seven days. Analysts suggest that Bitcoin may be entering a multi-week correction phase. Historically, week eight of Bitcoin price recovery tends to be a corrective week, followed by a similar trend in week nine, albeit to a lesser extent, in 2017.
Sean McNulty, Director of Trading at liquidity provider Arbelos Markets, believes that if Bitcoin breaks below the $90k level, it could trigger further liquidation.
