Bitcoin exhibited resilience on Tuesday, sustaining its position above crucial levels and edging closer to its all-time highs, buoyed by anticipation surrounding the impending halving event. However, indicators of capital outflows and a slowdown in on-chain activity hint at a potential deceleration in the cryptocurrency’s remarkable surge.
As of 01:03 ET (05:03 GMT), Bitcoin surged 4.5% over the past 24 hours, reaching $70,548.1. This places it a mere $3,000 shy of the peak reached earlier in March, showcasing its persistent bullish momentum.
The strength of the dollar, coupled with anticipation surrounding forthcoming cues on U.S. inflation and Federal Reserve actions, curbed further gains for the cryptocurrency.
Nevertheless, Bitcoin staged a notable recovery from its recent lows around $60,000, largely fueled by expectations surrounding the upcoming halving event. Scheduled for April upon the generation of the 740,000th block, this event will halve the token’s new supply, a factor contributing to its recent upward trajectory.
Despite the upbeat sentiment surrounding Bitcoin’s price, digital asset investment products experienced a noteworthy outflow, hitting nearly $1 billion in the week leading up to March 23, according to data from CoinShares. This exodus was primarily driven by traders divesting from products offered by Grayscale, particularly its Grayscale Bitcoin Trust (NYSE:GBTC) ETF, with total capital outflows from Bitcoin reaching approximately $904 million. This shift suggests investor hesitancy regarding further market gains, following a robust seven-week period of inflows triggered by the U.S. approval of spot Bitcoin ETFs earlier in 2024.
Furthermore, on-chain data from Glassnode indicates a significant slowdown in Bitcoin blockchain activity in recent months, despite the cryptocurrency’s price surges. According to analysts at Blockware Solutions, on-chain transactions are substantially lower compared to the levels witnessed during the 2021 bull run, underscoring the reluctance of major Bitcoin holders to engage in trading activities. This decoupling between price movements and on-chain activity suggests that a substantial portion of Bitcoin’s recent surge is fueled by speculative trading activity occurring off the blockchain. Such a trend could potentially introduce heightened volatility in the coming weeks, especially if capital flows into the cryptocurrency market decelerate.
Bitcoin’s enduring volatility remains a focal point for prospective investors, given its tendency to reach record highs and subsequently retrace swiftly. This inherent volatility underscores the need for caution and diligent risk assessment within the cryptocurrency market.
