Bitcoin‘s value briefly surged past the $71,000 mark on Tuesday before retreating, maintaining proximity to its all-time highs amidst growing anticipation for the impending halving event. However, indicators of capital outflows and sluggish on-chain activity hint at a potential deceleration in the cryptocurrency’s remarkable rally.
As of 13:59 ET (17:59 GMT), Bitcoin recorded a 1.1% increase in the past 24 hours, trading at $70,058.7, after peaking at $71,572 earlier in the day. While the cryptocurrency remains near its peak reached in March, the dollar’s relative strength and expectations surrounding U.S. inflation and Federal Reserve policies have tempered further gains.
Nevertheless, Bitcoin rebounded notably from last week’s lows around $60,000, largely fueled by excitement over the upcoming halving event, scheduled for April upon the generation of the 740,000th block. This event will halve Bitcoin miners’ rewards from 6.25 to 3.125 BTC, historically catalyzing price surges and potentially propelling Bitcoin to new highs.
Mehdi Lebbar, co-founder and CIO of Exponential.fi, emphasized the gradual integration of previous halving events and ETF approvals into Bitcoin’s price dynamics, expressing optimism about Bitcoin potentially reaching six-figure prices by year-end.
However, recent data from CoinShares revealed record outflows of nearly $1 billion from digital asset investment products, including exchange-traded funds, in the week ending March 23. Notably, traders withdrew significant amounts from Grayscale products, particularly the Grayscale Bitcoin Trust (NYSE: GBTC), with overall capital outflows from Bitcoin totaling approximately $904 million.
This hesitancy among investors coincided with a slowdown in on-chain activity, as observed by Glassnode data. Despite Bitcoin’s price escalation, on-chain transactions remained notably lower compared to the 2021 bull run, indicating reluctance among major Bitcoin holders to engage in trading activities.
Blockware Solutions analysts highlighted the divergence between on-chain transactions and price movements, suggesting that recent price fluctuations may be fueled more by external speculation than on-chain activities. This trend raises concerns about potential volatility, especially if capital flows dwindle.
Bitcoin’s enduring volatility remains a point of contention for prospective investors, given its tendency to rapidly ascend and retreat from record highs. As anticipation builds around the halving event and ongoing market dynamics, the cryptocurrency ecosystem braces for potential fluctuations in the weeks ahead.
