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Bitcoin tests US$23K as miners’ sales hit 3-year low

Bitcoin jumps to US$23K as miners’ sales hit a three-year low. Crypto strategist questions the sustainability of the current Bitcoin rally.

January 24, 2023 - Bitcoin has been fairly stable around the US$23k price level in the last 24h, but it has sustained an impressive performance of ~40% ytd. Miners seem to have transitioned from selling their production to holding it in the expectation of further gains. Usually, miners have to sell part of the mined Bitcoin to cover costs. Indeed, the miners’ sales hit a three-year low recently. Despite this positive indication, the recent rally has mostly been spot-driven with low liquidity, meaning that prices could move quickly to any direction, in our view.

In line with this view, Benjamin Cowen, a popular crypto strategist, warned that this Bitcoin rally could be unsustainable, comparing it to its behavior in early 2020. Cowen argued that period was the only other time in Bitcoin’s history that it has experienced a recession or recession-like conditions. According to Cowen, the price of Bitcoin could range between US$16-30k for a while before a clear direction can be determined. We understand Cowen’s argument comparing recession-like periods, but the current US monetary policy is different. The market is closely monitoring the next Fed decisions, which, if positive, could sustain Bitcoin’s price above the current levels.

Glassnode, an on-chain research firm, reported that the recent Bitcoin price spike has reclaimed several on-chain price models. For example, prices are currently within the Investor-Delta price band for a similar amount of time as in the 2018-2019 bear market, meaning improved market conditions ahead. On the other hand, more than 97.5% of the Bitcoin short-term holders (STHs) are in profit for the first time since November 2021 all-time high, increasing the likelihood of selling pressure from them. Therefore, Glassnode notes that on-chain data is not conclusive to confirm if we are in an early bull market, or this is just a bear market rally or a bull trap. We believe the on-chain analysis will only have more subsidy to point out a new bull market after macro conditions improve.

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