Key takeaways:

• Derivatives and onchain data shows a lack of bullishness, with 43% of Bitcoin holders suffering losses despite recent price increases.

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• Rising AI energy demands are cutting miners’ profits to record lows, forcing major publicly traded companies to dump BTC and go IT.

• Traders face a psychological hurdle of $76,000, which is the average cost for major corporations like Strategy.

Bitcoin (BTC) rose to a four-week high on Wednesday, potentially paving the way for a recovery toward the monthly close of $78,700 recorded in January. Despite a 22% gain from the local low of $60,000 on February 6, several onchain and derivatives indicators suggest that bears remain placid.

Demand for downside protection through Bitcoin options continues to dominate the market.

Put (put) options recently traded at a 10% premium to equivalent put (call) instruments. In neutral market conditions, this rate typically ranges from -6% to 6%, and this level was last seen in mid-January when Bitcoin was trading near $95,000.

Professional investors appear to be fearful of further declines as demand for bullish BTC futures remains stagnant; the annual contribution, i.e. the base rate, is currently below the neutral threshold of 5%.

Bitcoin derivatives weakness reflects a month-long consolidation following a 32% crash in the first week of February. However, the lack of conviction among bulls, even with prices above $73,000, suggests a deeper swing. This cautious mood is likely due to the fact that a significant portion of holders remain in the red.

According to Glassnode data, currently 43% of the supply is showing a loss based on the last exchange of price coins. The percentage of holders who suffered losses increased from 30% when Bitcoin was trading at $90,000 in behind schedule January. Traders fear that investors hanging on to these losses will gradually exit their positions as the price rises, creating sustained overall selling pressure that could limit further gains.

Another source of concern is the Bitcoin mining sector, which has come under significant pressure due to the exponential growth in demand for artificial intelligence. Rising energy costs and sinking demand for the Bitcoin blockchain ledger have pushed miners’ profitability to an all-time low. Several vast publicly traded mining companies have turned to AI computing, shedding their Bitcoin holdings in the process.

The Bitcoin Hashprice Index, which measures the expected daily value of one terahash per second of computing power, fell to $30 on Tuesday, down from $39 three months ago. Investors fear that miners could become net sellers after a prolonged period of accumulation.

Mining companies that previously held a Bitcoin strategic reserve are now reportedly seeing more profitable opportunities in alternative high-performance computing sectors.

Related: MARA Director Refutes Bitcoin Treasury Sale Narrative

The strategy’s cost of $76,000 could be a turning point for Bitcoin’s momentum

The (MSTR US) strategy remains a prime example of a Bitcoin-centric balance sheet strategy. After purchasing 720,737 BTC since its initial deployment in August 2020, the company has come under scrutiny as Bitcoin has fallen below its average purchase price of around $76,000.

Other publicly traded entities, including Metaplanet (3350 JP) and Twenty One Capital (XXI US), have faced similar valuation challenges in the current bear market environment.

While Strategy doesn’t face an immediate risk of liquidation or a lack of cash to pay interest on yielding assets like STRC, bears realize that prices above Bitcoin’s cost base encourage equity issuance without diluting current holders.

Essentially, market participants looking to push the price down have a mighty incentive to keep Bitcoin below $76,000. Therefore, a rebound towards $78,700 may take longer than expected, although the momentum may shift in the bulls’ favor once this key level is breached.