By Marcus Sotiriou, analyst at the UK-based digital asset broker Global block
Bitcoin once again failed to sustain its rally above $30,000 yesterday as it was harshly rejected by the key $31,500 level. This level is critical to overcome for Bitcoin to rally to $35,000.
Some on-chain metrics suggest the bottom may not yet be in sight and there could be more selling pressure. This is shown by the data from glass knot, specifically Net Unrealized Profit/Loss (NUPL), which is a measure of the network’s overall unrealized profit and loss as a proportion of market capitalization. This metric indicates that less than 25% of market capitalization is held for profit. This has happened 3 times since 2015 and each time led to a capitulation phase with further declines in the following months.
Additionally, the change in Bitcoin miners’ net position shows that Bitcoin miners have been net sellers over the past month, with miner distribution (selling pressure) peaking at around 8,000 Bitcoin per month. . I think this selling pressure from miners could be due to the falling price of Bitcoin, which has decreased the profitability of miners. However, I am not concerned with this behavior as Intel is releasing second-generation bitcoin-specific mining chips that are more efficient than those of most competitors. Crypto miner Hive Blockchain sold around 10,000 ETH to pay for Intel Bitcoin mining rigs. These will go into mass production in early 2023 and potentially increase the profitability of Bitcoin miners. I believe this will be a catalyst for increased adoption of Bitcoin mining globally, as it could help mining companies achieve ESG (environmental, social and governance) goals.
The key factor in determining whether there will be further cuts in the coming months is whether the surge in inflation persists. US CPI data for May is released on Friday and is expected to be 8.2% year-on-year, down 0.1% from April’s CPI of 8.3%. Even if the expected reading looks like a drop in inflation, I think we would need a bigger drop for the Federal Reserve to change course, and therefore a sustained upside for the crypto.