Institutional buying and hash-rate recovery bolster case for a Bitcoin bottom

Institutional spot buying and a recovery in mining hash rate are supporting the case that Bitcoin may have passed a cyclical bottom. High interest rates, however, could constrain near-term liquidity and increase price volatility.

In an Oct. 14 interview with Bitcoin Magazine, Charles Edwards, founder of Capriole Investments, said institutional demand and mining indicators were improving while tight monetary policy remained a near-term risk.

Edwards said net institutional buying across corporate treasuries and ETFs had remained near 130% of daily mined supply since Bitcoin reached lows around $60,000. ETFs were the largest buyers, while treasury purchases by companies including Strategy accounted for a smaller share. Positive net institutional buying provides a favorable backdrop for Bitcoin, he said.

Mining data also supported the bottoming thesis. Bitcoin's hash rate, which measures the computing power committed to mining worldwide, began a long-term decline about 10 months ago but turned higher four to six weeks ago. Extended declines typically signal industry stress and can force miners to sell reserves to fund operations.

Edwards said the recovery strengthened the view that a cyclical bottom was already in place. Still, he noted that nearly all publicly traded Bitcoin miners plan to shift at least 50%, or as much as 100%, of their computing capacity or future capacity toward AI over the next six to 18 months, making hash-rate trends harder to interpret than in previous cycles.

The source of the increase remains unclear. Edwards said it could reflect activity in foreign countries, off-grid surplus energy or smaller operators using otherwise wasted energy such as gas flaring. Even without a clear source, a sustained multiweek rise in hash rate has historically been positive for Bitcoin, he said.

On valuation, Edwards said Bitcoin had moved out of deeply discounted territory and was approaching fair value, though it remained slightly undervalued. He placed production costs at roughly $60,000 to $70,000 and energy value, a network valuation based on energy input, above $100,000. Prices near production costs or within 10% to 20% of them have often presented attractive multiyear opportunities, he said.

Positioning indicators showed no extreme signal likely to drive a major near-term move. Edwards said the effect of the large short squeeze from $60,000 to $70,000 was largely complete, while a measure aggregating futures, perpetual contracts and options had returned toward normal levels. Mixed signals could leave prices choppy in the coming weeks.

High rates were the main short-term concern. Edwards said the rate he tracks had moved above 5% to about 5.3%, raising capital costs and equity discount rates while making cash relatively more attractive. Bitcoin has functioned as a Wall Street balance-sheet and hedge-fund asset for only four to five years, leaving its behavior under sustained high rates largely untested. Global money supply remains a key long-term macro indicator, but it has been flat or slightly lower in recent months. Edwards said rising unemployment linked to AI could eventually make high-rate Federal Reserve policy unsustainable and prompt stimulus, increasing the relative appeal of gold and Bitcoin.