On-Chain Data Warns of Caution Despite Bitcoin Testing $28,000

Today, the Bitcoin price broke above the $28,000 mark to reach a 9-month high. Still, the influx of BTC on exchanges and escalating mining costs underscore the need for caution.

Bitcoin Rally May Come to the Breaks

Bitcoin has experienced a 30% price increase in the past week. Nevertheless, on-chain calculations suggest that the price of BTC may move back towards $24,500 despite this.

The average cost of mining Bitcoin has risen faster than its price over the past month, according to financial data analysis platform MacroMicro.

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

Notably, the Bitcoin price rose above average mining costs by approximately $3,000 on March 18. However, the profits could soon disappear if new miners join the network in the coming days to profit from the rising prices.

The current price rise could see miners selling more tokens to compensate for some of their losses earlier. And with roughly 10% of the total BTC supply in mining reserves, selling pressure from the Bitcoin node operators could have a significant bearish drag on the price of BTC.

In another cautionary bearish trend, BTC holders have recently accelerated the influx of tokens on exchanges, according to leading blockchain intelligence firm Glassnode.

BTC deposits on exchanges have consistently exceeded withdrawals. Over the past seven trading days, the supply of Bitcoin on exchanges has gradually increased from 3,895 BTC on March 13 to more than 36,700 BTC deposited by the end of March 19.

Typically, when exchange deposits exceed withdrawals for an extended period of time, it can mean that BTC holders are increasingly positioning themselves for short-term trades and profit-taking opportunities.

If this theory holds, a selloff is likely to trigger BTC price declines in the coming weeks.

BTC Price Prediction: A drop below $25,000

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

The IOMAP chart shares existing Bitcoin addresses by comparing their average purchase price to current prices. As of March 20, more than 72% of Bitcoin holders are in profit. This could mean that there is considerable scope for network-wide profit-taking.

If Bitcoin enters a bearish trend, $27,000 will be the first stop, as the 307,000 addresses that bought 346,000 units of BTC could offer significant support. Nevertheless, if this demand barrier cannot hold, a sharp decline towards $24,500 can be expected. Here, around 1 million Bitcoin addresses bought 360,000 tokens.

To invalidate the pessimistic outlook, the Bitcoin price would have to climb above the $29,500 mark, where 345,000 addresses had previously bought 130,000 BTC. Moving past this wall of resistance could trigger a rally to $32,000, where a cluster of 237,000 addresses could look to sell some of their 74,000 BTC.