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Grayscale’s spot Bitcoin exchange-traded fund (ETF) saw investors withdraw $598.9 million on February 29, leading to a more than 3% drop in Bitcoin from its 24-hour high. According to Tradingview data, Bitcoin reached its 24-hour high of $63,585 early on February 29 and has since fallen by approximately 3.3% to just below the $61,500 level.
What’s Happening on the Bitcoin Front?
Farside Investor’s preliminary data indicates that the Grayscale Bitcoin Trust, which asset managers recently converted into an ETF, saw daily net outflows nearing $600 million on February 29. This figure falls short of the ETF’s record net outflow of $640.5 million on January 22.
Bloomberg senior ETF analyst Eric Balchunas commented on the day’s outflows in a February 29 post, noting that the amount was significant. These near-record outflows occurred just days after GBTC recorded a historic low daily net outflow of $22.4 million on February 26. Balchunas added, “Two steps forward, one step back.”
While Bitcoin reached a two-year high of $64,000 on February 28, the ten spot Bitcoin ETFs in the United States saw a record net inflow of $673.4 million. The latest GBTC outflows could impact the day’s inflows. Complete entry data for the other nine ETFs is not currently available, but Farside’s February 29 data shows that Fidelity’s Bitcoin ETF, one of the top three funds by assets, only managed a net inflow of $44.8 million, marking its fourth-lowest entry day.
Meanwhile, JPMorgan analysts warned investors in a new note that the excitement around Bitcoin’s halving could lead to a price drop. In a February 29 note shared by Bloomberg, analysts suggested that the upcoming halving event in April could have the opposite effect, potentially bringing Bitcoin close to $42,000 instead of rising.
The Bitcoin halving event cuts the Bitcoin block reward from 6.25 to 3.125 Bitcoins, and historically, miner production costs tend to rise afterward, which has been a factor for Bitcoin price rallies.
Analysts Highlight Intriguing Data
Analysts see the cost of mining a Bitcoin as the theoretical lowest level to which the price should fall, and mechanically, it should double to $53,000 after the halving. However, analysts suggest that mining difficulty could be 20% lower than initially estimated, which would lower production costs and the price of Bitcoin, potentially leading to a drop to $42,000 after the April halving event.
Analysts calculated the extra 20% drop in mining difficulty assuming that some miners with less efficient machines and little money for upgrades will take their machines offline as operating costs increase.
This situation would reduce Bitcoin’s hash rate and mining difficulty by an estimated 20%, aligning with predictions made by Galaxy Digital last month. Analysts acknowledged that the mining difficulty reduction might not occur if the demand from Bitcoin ETF funds keeps the price of Bitcoin high, as inefficient mining machines could remain profitable.
