Key takeaways:
Derivatives and on-chain data show a lack of bullish conviction as 43% of Bitcoin holders remain at a loss despite recent price gains.
Rising demand for AI power is driving miners’ profits to record lows, forcing major publicly traded companies to dump BTC and move into computing.
Traders face a psychological hurdle at $76,000, the average cost base for major corporate shareholders like Strategy.
Bitcoin (BTC) hit a four-week high on Wednesday, potentially clearing the way for a recovery towards the $78,700 monthly close recorded in January. Despite a 22% rally from the local low of $60,000 on February 6, several on-chain and derivatives metrics suggest that the bears remain comfortable.
Demand for downside protection through Bitcoin options continues to dominate the market.
Put options recently traded at a 10% premium relative to equivalent call instruments. Under neutral market conditions, this indicator typically ranges between -6% and 6%, a level last seen in mid-January, when Bitcoin was trading near $95,000.
Professional traders appear to fear further declines while demand for bullish BTC futures remains stagnant; The annualized premium, or base rate, is currently below the neutral threshold of 5%.
The weakness in Bitcoin derivatives reflects month-long consolidation following the 32% drop during the first week of February. However, the bulls’ lack of conviction even as prices break above $73,000 suggests deeper hesitancy. This cautious mood is likely due to the fact that a significant portion of holders are still stuck in the red.
Currently, 43% of the supply remains at a loss based on the price of coins last moved, according to Glassnode data. This proportion of holders who suffered losses increased from 30% when Bitcoin was trading at $90,000 in late January. Traders fear that investors racking up these losses will gradually exit their positions as the price recovers, creating persistent selling pressure that could limit future gains.
Another cause for concern comes from the Bitcoin mining sector, which has faced significant pressure due to the exponential growth in demand for artificial intelligence. Rising energy costs and declining demand for Bitcoin’s blockchain ledger have driven miners’ profitability to all-time lows. Several major publicly traded mining companies have pivoted toward AI computing, dumping their Bitcoin holdings in the process.
The Bitcoin Hashprice Index, which measures the expected daily value of one terahash per second of hashing power, plummeted to $30 on Tuesday, down from $39 three months ago. Investors fear that miners could become net sellers after a prolonged period of accumulation.
Mining companies that previously held a strategic reserve of Bitcoin are now reportedly seeking more profitable opportunities in alternative high-performance computing sectors.
Related: MARA Executive Rejects Bitcoin Treasury Liquidation Narrative
Strategy’s $76,000 cost base could be the turning point for Bitcoin momentum
Strategy (MSTR US) remains the prime example of a Bitcoin-focused balance sheet strategy. After purchasing 720,737 BTC since its initial deployment in August 2020, the company faced scrutiny when Bitcoin fell below its average acquisition price of approximately $76,000.
Other publicly traded entities, including Metaplanet (3350 JP) and Twenty One Capital (XXI US), have faced similar valuation challenges during the current bear market conditions.
While Strategy faces no imminent liquidation risks or lack of cash for interest payments on yield-producing assets like STRC, bears recognize that prices above Bitcoin’s cost base incentivize undiluted issuance of shares to current holders.
Essentially, market participants looking to suppress the price have strong incentives to keep Bitcoin pegged below $76,000. Therefore, a recovery towards $78,700 may take longer than expected, although momentum could shift in favor of the bulls once that key level is breached.
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