Grayscale’s conversion of its Bitcoin Trust into an exchange-traded fund (ETF) experienced a drastic $598.9 million withdrawal on February 29, contributing to a sharp 3.3% dip in Bitcoin’s value from its daily peak. The cryptocurrency‘s price fell to just below $61,500, retreating from its 24-hour high of $63,585.
Unprecedented Outflows and Market Impact
The outflow from Grayscale’s Bitcoin ETF is near to its highest ever, with a record $640.5 million seen earlier on January 22. The substantial withdrawals have not gone unnoticed, with Bloomberg’s senior ETF analyst Eric Balchunas remarking on the significance of the event. Just days prior, a historic low outflow of $22.4 million had been recorded, indicating a volatile period for the fund.
Bitcoin ETFs and Halving Concerns
The American market for Bitcoin ETFs has been bustling, with a combined net inflow of $673.4 million hitting a ten-ETF high on February 28. However, Grayscale’s latest outflows could overshadow these gains. Contrastingly, Fidelity’s Bitcoin ETF saw a relatively modest net inflow of $44.8 million, marking one of its lower intake days.
Warnings from JPMorgan analysts suggest that the anticipated Bitcoin halving event in April, which will cut block rewards in half, might actually precipitate a decline in Bitcoin’s price, possibly to $42,000, contrary to the common expectations of a price surge.
The cost of Bitcoin production is expected to effectively double post-halving, theoretically setting a new bottom price for the cryptocurrency. However, with a potential 20% decrease in mining difficulty, production costs may drop, leading to the forecasted price fall post-halving. The predicted drop in mining difficulty assumes that less efficient miners will cease operations, impacting the overall hash rate and difficulty of Bitcoin mining.