Bitcoin’s mining difficulty recently increased by 6% to an all-time high of 101.65 trillion amid a record hash rate for the network. This move coincides with bullishness from a major technical indicator, signaling Bitcoin’s potential to climb towards $120,000.
The Bullish Bitcoin Technical Indicators
The price of Bitcoin crossed back above $75,000, a critical psychological level, following Donald Trump’s win in the U.S. election on November 5. CoinLupin, a market analyst at on-chain analytics firm CryptoQuant, utilized the Market Value Realized Value (MVRV) indicator to estimate Bitcoin’s present price.
The MVRV ratio is a powerful traditional tool for Bitcoin traders, offering insights into market valuation and potential price trends. CoinLupin stated that Bitcoin’s MVRV currently hovers at 2 while its price climbed just above $75,000. This suggests the market’s surface value is twice the on-chain estimated value.
The analyst added that the MVRV indicator recently surpassed the 365-day average and is now above the 4-year average, which often mirrors Bitcoin’s cycle. “This suggests that the upward trend remains intact, and generally, the cycle peak tends to occur when the MVRV reaches levels between 3 and 3.6,” CoinLupin emphasized.
He claims a 43-77% increase is critical for the MVRV ratio, assuming the Realized Value (RV) remains constant. When applied to Bitcoin, this translates to a target of $95,000 to $120,000. The analyst further noted that the RV is expected to rise as the market progresses with fresh demand. Considering previous cycles, he believes a peak may form above these zones.
Although Bitcoin has increased dramatically in the last 12 months, it has barely returned to its average level on the MVRV indicator. However, the upward momentum is still maintained.
Implications of Bitcoin’s Surging Mining Difficulty
Meanwhile, Bitcoin appears set to enter a bull run cycle for the rest of 2024 and beyond. This is evidenced in Bitcoin’s ability to hit new highs in mining difficulty. Simply put, mining difficulty measures the difficulty of solving the complex cryptographic puzzles used in the mining process.
This recent surge suggests miners will need to work harder to mine Bitcoin. Consequently, only the strongest and most efficient operators in the industry will get involved in securing the network.
The rising difficulty means miners earn less Bitcoin per unit of computational power invested, leading to thinner profit margins. However, higher difficulty is often considered good news as it helps to strengthen the Bitcoin network. Beyond the security, the rate of emissions is reduced, fueling scarcity and price surge in the long term.
As of this writing, the BTC price was $76,355, down 0.13% over the last 24 hours. Still, following Trump’s election victory, a Bitcoin target of $120,000 and beyond in the coming weeks seems more likely.