Bitcoin Faces 3% Drop Amid Major Withdrawals from Grayscale’s ETF; JPMorgan Analysts Predict Post-Halving Slump
Summary:
Bitcoin saw a 3% drop from its 24-hour high as investors withdrew $598.9 million from Grayscale's Bitcoin exchange-traded fund (ETF), marking the second-largest net outflow for the fund. This comes after a two-year high of $64,000 experienced by Bitcoin. However, JPMorgan analysts warn of a potential slump in Bitcoin's valuation following the expected 'halving' event in April. They suggest the price could decrease to as low as $42,000 due to potential reductions in mining costs and difficulty.
Bitcoin experienced a drop of over 3% from its 24-hour high, coinciding with investors pulling out $598.9 million from Grayscale's Bitcoin exchange-traded fund (ETF) on February 29. Bitcoin reached $63,585 early on February 29, but has seen a decline of approximately 3.3% to just below $61,500. This occurred while the Grayscale Bitcoin Trust witnessed net outflows of about $600 million on the same day, as reported by preliminary data from Farside Investor. The only larger net outflow from the ETF was$640.5 million on January 22.
It should be noted that the significant outflow followed a record low daily net outflow of $22.4 million from GBTC on February 26.
On February 28, the ten US-based Bitcoin ETFs combined experienced a record-setting net inflow of $673.4 million as Bitcoin achieved a two-year high of $64,000. The recent outflows from GBTC could, however, negatively affect these inflows.
Also worth noting is the underwhelming performance of Fidelity's Bitcoin ETF on February 29. It managed to generate mere net inflows of $44.8 million, its fourth lowest.
JP Morgan analysts have warned investors that Bitcoin's price might slump after the hype of the "halving" event subsides. Bitcoin's halving event in April, which is anticipated to increase Bitcoin's price, could have the contrary effect and see it fall as low as $42,000.
The Bitcoin halving event, which cuts the Bitcoin block reward from 6.25 BTC to 3.125 BTC, often acts as a catalyst for Bitcoin price surges since mining costs usually increase afterward.
However, if mining difficulty turns out to be 20% less than projected, that could drive down production costs and Bitcoin's price. In this scenario, the digital asset's price could plummet to $42,000 after the April halving. This prediction takes into account the possibility of less efficient miners stopping their operations due to increasing running costs, thereby reducing Bitcoin's hash rate and mining difficulty by an expected 20%. Nonetheless, if Bitcoin's price stays high, particularly due to demand from Bitcoin ETFs, inefficient mining rigs could remain profitable.
Published At
3/1/2024 6:37:41 AM
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