The price of Bitcoin maintained its upward trajectory on Tuesday, staying above crucial levels and approaching record highs amidst anticipation surrounding the forthcoming halving event. However, indications of capital outflows and sluggish on-chain activity suggest a potential deceleration in the cryptocurrency’s impressive rally.
As of 01:03 ET (05:03 GMT), Bitcoin was trading 4.5% higher over the past 24 hours, reaching $70,548.1. The world’s largest cryptocurrency stood roughly $3,000 away from its peak achieved earlier in March.
Although the dollar exhibited relative strength, tempering further gains in Bitcoin, the cryptocurrency rebounded sharply from last week’s lows of approximately $60,000, largely driven by excitement surrounding the impending halving event. The event, expected to occur sometime in April upon the generation of the 740,000th block, will slash the new supply of Bitcoin by 50%.
Despite the positive sentiment surrounding Bitcoin’s price, there have been noteworthy developments elsewhere in the market. Data from CoinShares, a digital asset management firm, revealed a record-high outflow of nearly $1 billion from digital asset investment products, including exchange-traded funds, in the week leading up to March 23. Much of these outflows stemmed from traders withdrawing from Grayscale products, particularly its Grayscale Bitcoin Trust (NYSE: GBTC) ETF, with overall capital outflows from Bitcoin totaling approximately $904 million. CoinShares interpreted these outflows as a sign of investor caution regarding potential further gains in crypto markets, coinciding with a notable slowdown in inflows from the prior week.
This decrease in inflows follows a remarkable seven-week streak of inflows, largely triggered by the U.S. approval of spot Bitcoin ETFs earlier in 2024.
Additionally, on-chain data from Glassnode revealed a significant slowdown in activity within the Bitcoin blockchain in recent months, despite the cryptocurrency reaching new price peaks. Analysts from Blockware Solutions noted that on-chain transactions were only a fraction of the volumes witnessed during the 2021 bull run, indicating that major Bitcoin holders remained hesitant to trade their tokens.
However, this lack of volume and liquidity suggests that much of Bitcoin’s recent price movement is driven by speculation outside the blockchain—a trend that could lead to increased volatility in the coming weeks, particularly if capital flows continue to diminish. Bitcoin’s volatility remains a significant concern for potential investors, as the token has a history of rapidly losing record highs as quickly as it achieves them.