On-chain data warns of caution despite bitcoin testing $28,000

Today, bitcoin price broke the $28,000 mark to reach a 9-month high. Still, the influx of BTC onto exchanges and rising costs for miners underscore the need for caution.

bitcoin rally may break

Bitcoin has experienced a 30% price increase in the past week. Nevertheless, on-chain metrics suggest that the BTC price may recover to $24,500 despite this.

According to economic data analysis platform MacroMicro, the average cost of mining bitcoin has risen sharply over the past month.

In the 30 days before March 20, mining costs reached $33,000 per block, while the BTC price only reached $28,500. The disparity means that miners have accumulated losses over the past month despite the recent price rally.

Notably, on March 18, the price of bitcoin had risen to almost $3,000 above the average mining cost. However, the surplus could soon disappear if new miners join the network to profit from rising prices in the coming days.

Bitcoin Average Mining Cost, March 2023
Bitcoin Average Mining Cost, March 2023. Source: Macromicro

The current price rally can see miners selling more coins to recoup some of their previous losses. And with around 10% of the total BTC circulating supply in miner reserves, selling pressure from bitcoin node operators could lead to a significant bearish effect on BTC’s price.

In yet another cautiously bearish trend, according to leading blockchain intelligence firm Glassnode, BTC holders have recently accelerated the inflow of the token onto exchanges.

BTC deposits on exchanges consistently exceed withdrawals. Over the past seven trading days, the supply of bitcoin on exchanges has increased from 3,895 BTC on March 13 to over 36,700 BTC on March 19.

Bitcoin exchange Netflow, March 2023.
Bitcoin exchange Netflow, March 2023. Source: Glassnode

Generally, when exchanges see deposits exceed withdrawals for an extended period of time, it can mean that BTC holders are positioning themselves for bullish short-term trading and profit-taking opportunities.

If this theory holds, the selloff could trigger a BTC price retracement in the coming weeks.

BTC Price Prediction: A Dip Below $25,000

Taking a closer look at In/Out of the Money at Price (IOMAP) data compiled by IntoTheBlock, $24,500 seems a likely destination for BTC.

The IOMAP chart splits current bitcoin addresses by comparing their average buy price to current prices. As of March 20, over 72% of bitcoin holders are in profit. This could mean that there is plenty of room for network-wide profit-taking.

If bitcoin were to enter a bearish trend, $27,000 would be the first stop as 307,000 addresses bought 346,000 units of BTC which could act as considerable support. Nevertheless, if this demand barrier cannot sustain, a sharp decline towards $24,500 can be expected. Here, nearly 1 million bitcoin addresses bought 360,000 coins.

Bitcoin (BTC) price in/out of the money data.  March 2023.
Bitcoin (BTC) in/out of money data. March 2023. Source: IntoTheBlock

To invalidate the pessimistic view, bitcoin price would need to climb above the $29,500 mark, where 345,000 addresses previously bought 130,000 BTC. A break above this resistance wall could lead to a move to $32,000, where a cluster of 237,000 addresses could attempt to sell some of their 74,000 BTC.


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