Bitcoin Bulls are back, but $78k may remain resistance

Key considerations:

• Derivatives and onchain data show a glaring lack of belief as 43% of Bitcoin holders remain at a loss despite recent price increases.

• AI’s increasing energy demand is driving miners’ profits to record lows, forcing major listed companies to offload BTC and go liquidating.

• Traders face a mental hurdle at $76,000, the average cost for major corporate holders like Strategy.

Bitcoin (BTC) hit a four-week high on Wednesday, potentially clearing the way for a recovery to the $78,700 monthly high recorded in January. Despite a 22% rally from the local low of $60,000 on February 6, several on-chain and derivative metrics show that the bears remain comfortable.

Demand for downside protection through Bitcoin options dominates the market.

Put (put) options have recently traded at a 10% premium to the equivalent call (call) instruments. In neutral markets, this indicator typically ranges from -6% to 6%, a level last seen in mid-January when Bitcoin was trading around $95,000.

Professional traders seem to fear further downside, while demand for bullish BTC futures remains stagnant; The annual premium or base rate is currently below the neutral threshold of 5%.

The weakness in Bitcoin derivatives reflects a month-long consolidation after a 32% plunge in the first week of February. However, the lack of conviction from the bulls, even as prices rise above $73,000, suggests a deeper hesitancy. This cautious sentiment is probably why most of their holders are still stuck in the red.

According to Glassnode, currently, 43% of the supply is held at a loss based on the last price of coins moved. When Bitcoin traded at $90,000 at the end of January, this share of loss holders increased from 30%. Traders fear that investors sitting on these losses will gradually exit their positions as the price recovers, creating constant selling pressure that could limit further gains.

Another source of concern stems from the Bitcoin mining sector, which has come under severe pressure due to the exponential growth in demand for artificial intelligence. Rising energy costs and falling demand for the Bitcoin blockchain led miners’ profitability to an all-time low. Several major listed mining companies are relying on AI computers, draining their Bitcoin holdings in the process.

The Bitcoin Hashprice Index, which measures the expected daily value of one terabyte of hashing power per second, fell to $30 on Tuesday, down from $39 three months ago. Investors fear that miners may turn to net sellers after a long period of accumulation.

According to reports, mining companies that previously held a strategic reserve of Bitcoin are now looking at profitable opportunities in alternative sectors of high-performance computing.

related to: MARA Exec Returns to Bitcoin Treasury Sale Story

Strategy’s $76,000 core could be a turning point for Bitcoin’s momentum

The strategy (MSTR US) remains a prime example of a Bitcoin-focused balance sheet strategy. After buying 720,737 BTC since its initial placement in August 2020, the company came under scrutiny as Bitcoin fell below its average purchase price of around $76,000.

Other publicly traded institutions, including Metaplanet (3350 JP) and Twenty One Capital (XXI USA), have faced similar valuation challenges in the current bear market environment.

Although the Strategy does not face the risks of immediate liquidation or lack of cash for interest payments from income-generating assets like STRC, the owners recognize that prices above the value of Bitcoin encourage the issuance of shares without diluting current holders.

Basically, market participants looking to push the price down have a strong incentive to keep Bitcoin below $76,000. Therefore, the recovery to $78,700 may take longer than expected, although the momentum may change in favor of the bulls after this key level is broken.