By Marcus Soterio, analyst at UK-based digital asset brokerage GlobalBlock
Bitcoin failed to sustain its rally above $30,000 yesterday as it was strongly rejected at the $31,500 key. This level is crucial for Bitcoin to rally towards $35,000.
Some gauges across the chain suggest the bottom may yet be seen and further sales pressure is likely. This is reflected in data from Glassnode, specifically Net Unrealized Profit/Loss (NUPL), which measures the total unrealized profit and loss of the network as a percentage of market capitalization. This measure indicates that less than 25% of the market value is held in profit. This has happened 3 times since 2015 and each time has resulted in further falling capitation levels in the following months.
In addition, the change in the net position of the Bitcoin miners shows that Bitcoin miners were net sellers in the last month, as the distribution (selling pressure) of miners reached a peak of around 8,000 Bitcoin per month. I think this selling pressure from miners has reduced the profitability of miners due to the drop in Bitcoin price. However, this feature doesn’t bother me as Intel is releasing second-generation, Bitcoin-based mining chips that are more efficient than most competitors. Crypto miner Hive Blockchain sold about 10,000 ETH to pay Intel Bitcoin miners. These will go into mass production in early 2023 and could increase the profitability of Bitcoin miners. I think this will be a catalyst for Bitcoin mining to gain global acceptance as it helps mining companies meet their ESG (Environmental, Social and Governance) objectives.
The key to determining whether there will be further losses in the coming months is if rising inflation continues. May US CPI data will be released on Friday and is expected to be 8.2% year-on-year, a 0.1% decrease from April’s CPI of 8.3%. Although the expected reading seems to be a reduction in inflation, I think we need to see a more significant decline for the Federal Reserve to change course and thus remain upside for crypto.