Bitcoin price rose briefly reclaimed the $71,000 handle on Tuesday, staying in sight of record highs amid anticipation of the upcoming halving event, although signs of capital outflows and sluggish on-chain activity suggested that the token’s stellar rally could be slowing.
Bitcoin was trading up 4.4% in the past 24 hours at $70,951.8 by 09:13 ET (13:13 GMT). It surged as high as $71,572 in early trading before paring some gains. The world’s largest cryptocurrency was now less than $3,000 away from a record high hit earlier in March.
Relative strength in the dollar, ahead of more cues on U.S. inflation and the Federal Reserve, limited more gains in the token.
But Bitcoin recovered sharply from lows of around $60,000 hit last week, largely on anticipation of the halving event, which will see new supply of the token slashed by 50%. The event is set to occur some time in April with the generation of the 740,000th block.
Bitcoin miners' rewards will halve from 6.25 to 3.125 BTC after the upcoming halving. Historically, such events have boosted BTC's price, often leading to new highs in the months afterward.
Bitcoin price upbeat, but ETFs see record outflows
Data from digital asset management firm CoinShares showed on Monday that digital asset investment products, such as exchange-traded funds, saw a record-high outflow of nearly $1 billion in the week to March 23.
Of the outflows, a bulk were driven by traders pulling out of Grayscale products, specifically its Grayscale Bitcoin Trust (NYSE: GBTC) ETF. Overall capital outflows from Bitcoin also amounted to about $904 million.
CoinShares said the outflows signaled some hesitancy among investors over further gains in crypto markets, which also saw inflows slow sharply from the prior week.
Still, the outflows come after a stellar seven-week run of inflows, which were triggered largely by the U.S. approval of spot Bitcoin ETFs earlier in 2024.
Bitcoin on-chain activity seen slowing
On-chain data from Glassnode showed that activity in the Bitcoin blockchain had slowed drastically in recent months, even as the token scaled new price peaks.
On-chain transactions were at a fraction of volumes seen during the 2021 bull run, Blockware Solutions analysts said in a recent note. This showed that major Bitcoin holders remained largely reluctant to trade their tokens.
But the lack of volumes and liquidity signaled that a bulk of Bitcoin’s recent price move was being driven by price speculation outside the blockchain- a trend that could herald more volatility in the coming weeks, especially if capital flows slow.
Bitcoin’s volatility has remained a main point of contention for potential investors, given that the token lost record highs just as quickly as it attained them.
[Ambar Warrick contributed to this article]