Bitcoin (BTC) experienced a decline of more than 3% from its highest point within a 24-hour period as investors in Grayscale’s Bitcoin exchange-traded fund (ETF) withdrew $598.9 million from the fund on February 29. This marks the second-largest net outflow in the fund’s history. Bitcoin reached a high of $63,585 on February 29 but has since dropped by approximately 3.3% to just under $61,500, according to Cointelegraph Markets Pro.
The Grayscale Bitcoin Trust (GBTC), which recently converted into an ETF, saw daily net outflows of $600 million on February 29, according to preliminary data from Farside Investor. This is only surpassed by the record net outflow of $640.5 million that occurred on January 22. Bloomberg senior ETF analyst Eric Balchunas commented on the significant outflows, stating, “That’s a lot.”
These near-record outflows came just days after GBTC experienced a historic low daily net outflow of $22.4 million on February 26. Balchunas added, “Two steps forward, one step back.” On February 28, the ten spot Bitcoin ETFs in the United States collectively saw a record-high net inflow of $673.4 million as Bitcoin reached a two-year high of $64,000.
The recent outflows from GBTC could impact the day’s inflows. While full inflow data for the other nine ETFs is not currently available, Farside’s February 29 data shows that Fidelity’s Bitcoin ETF, one of the largest funds by assets, generated only $44.8 million in net inflows, its fourth-lowest day of inflows.
Meanwhile, JPMorgan analysts warned in a recent note to investors that the price of Bitcoin may decline after the “halving euphoria” subsides. The analysts noted that Bitcoin’s halving event in April, which many believe will drive its price higher, could actually have the opposite effect and cause it to approach $42,000 instead. The halving event reduces the Bitcoin block reward from 6.25 BTC to 3.125 BTC and historically leads to price rallies as miner production costs typically increase afterward.
The analysts stated that production costs, which represent the lowest price Bitcoin should theoretically reach, could “mechanically double” to $53,000 post-halving. However, they also highlighted the possibility of a 20% decrease in mining difficulty, which would lower production costs and Bitcoin’s price. This could result in the cryptocurrency sliding to $42,000 after the April halving. The analysts based their calculation of the 20% mining difficulty drop on the assumption that miners with less efficient machines and limited funds for upgrades would shut down their operations as running costs rise.
This would reduce Bitcoin’s hash rate and mining difficulty, aligning with estimates made by Galaxy Digital last month. The analysts acknowledged that the mining difficulty drop may not occur if inefficient mining rigs remain profitable, especially due to demand from Bitcoin ETFs.