Bitcoin falls 0.43% amid DeFi sector contagion: Market turbulence continues
Bitcoin plummeted more than 3% from its 24-hour peak on Feb. 29 after investors in Grayscale’s spot Bitcoin exchange-traded fund (ETF) withdrew US$598.9 million, the fund’s second-largest net outflow on record.
Bitcoin reached a 24-hour high of US$63,585 early on February 29 and has since fallen roughly 3.3% to a little under US$61,500, according to Cointelegraph Markets Pro. It comes as the Grayscale Bitcoin Trust (GBTC), the asset managers’ freshly converted ETF, suffered daily net outflows of US$600 million on February 29, according to preliminary Farside Investor statistics.
It trails behind the ETF’s record US$640.5 million net outflow day on January 22. “That’s a lot,” Bloomberg senior ETF analyst Eric Balchunas remarked in a report on the outflows on February 29.The near-record outflows came just days after GBTC reported a record-low daily net outflow of US$22.4 million on Feb. 26. On Wednesday, Feb. 28, the 10 US spot Bitcoin ETFs had a combined record-high net inflow of US$673.4 million, as Bitcoin hit a two-year high of US$64,000.
The new GBTC outflows may reduce the day’s inflows. Fidelity’s Bitcoin ETF, FBTC, experienced a notable surge in capital inflows, with a massive US$243 million inflow on a single day, propelling its total net flows to an impressive US$4.2 billion. Despite this, the full inflow data for the other nine ETFs is not yet available. Meanwhile, JPMorgan analysts warn that the price of Bitcoin may decrease as the “halving euphoria” fades.
Bitcoin’s anticipated halving event in April, which many expect to boost its price, may have the opposite effect, bringing it closer to US$42,000, according to analysts in a Feb. 29 letter seen by Bloomberg.
The Bitcoin halving event reduces the Bitcoin block reward from 6.25 BTC to 3.125 BTC and has historically served as a trigger for Bitcoin price increases, as miner production costs often rise in the aftermath.
Production expenses, or the cost of mining one Bitcoin, are viewed as the lowest point at which Bitcoin’s price can potentially fall, and should “mechanically double” to US$53,000 following the halving, according to experts.
However, mining difficulty might be 20% lower than previously projected, lowering production costs and Bitcoin’s price, perhaps causing the cryptocurrency to fall below US$42,000 during the April halving, according to the experts.
Analysts calculated that the 20% decrease in mining difficulty could occur if certain miners, who operate less efficient computers and lack funds for upgrades, decide to shut down their mining rigs due to rising operating costs. As a result, Bitcoin’s hash rate and mining difficulty would decrease by approximately 20%, aligning with the estimates provided by Galaxy Digital last month. However, the researchers acknowledged that such a decline in mining difficulty is unlikely, as even inefficient rigs may remain profitable if Bitcoin’s price remains high, especially considering the demand from Bitcoin ETFs.
