Mar 26 2024: The price of Bitcoin maintained its upward trajectory on Tuesday, staying above crucial levels and nearing its all-time highs as investors anticipate the upcoming halving event. Despite this positive momentum, indications of capital outflows from exchange-traded funds (ETFs) and a slowdown in on-chain activity suggest that Bitcoin’s remarkable rally may be losing steam.
As of 01:03 ET (05:03 GMT), Bitcoin was trading up 4.5% over the past 24 hours at $70,548.1, with the world’s largest cryptocurrency remaining approximately $3,000 below its previous record high reached earlier in March.
The strength of the dollar, coupled with expectations surrounding U.S. inflation data and Federal Reserve actions, tempered further gains in Bitcoin’s price. Nevertheless, Bitcoin rebounded significantly from recent lows around $60,000, largely fueled by anticipation of the halving event, which will halve the new supply of Bitcoin upon the generation of the 740,000th block, expected in April.
While Bitcoin’s price outlook appears positive, data from CoinShares revealed record-high outflows of nearly $1 billion from digital asset investment products, including ETFs, in the week ending March 23. Much of this outflow was driven by traders withdrawing from Grayscale products, notably the Grayscale Bitcoin Trust (NYSE: GBTC) ETF, contributing to total capital outflows from Bitcoin reaching approximately $904 million.
This shift in investor sentiment suggests some caution regarding further market gains, following a strong seven-week period of inflows triggered by the approval of spot Bitcoin ETFs in the United States earlier in 2024.
Moreover, on-chain data from Glassnode indicates a significant slowdown in Bitcoin blockchain activity in recent months, despite the token’s price reaching new highs. This reduced on-chain transaction volume, as noted by Blockware Solutions analysts, indicates a reluctance among major Bitcoin holders to trade their assets actively.
However, the diminished trading volumes and liquidity hint at a substantial portion of Bitcoin’s recent price surge being fueled by speculative trading off the blockchain. This trend could lead to increased volatility in the coming weeks, particularly if capital flows into Bitcoin slow down.
Bitcoin’s persistent volatility remains a key concern for potential investors, as the token has experienced rapid price fluctuations, both upward and downward, in its pursuit of record highs.