In recent developments, Bitcoin may be witnessing a shift in momentum as institutional outflows diminish.
According to data from the UK-based investment firm Farside, the Grayscale Bitcoin Trust (GBTC) experienced a modest reduction of $170 million on March 22.
This comes amid discussions surrounding the United States Spot Bitcoin exchange-traded funds (ETFs), which have faced challenges, including decreased inflows and record-high outflows from GBTC, signaling a potential consolidation phase before Bitcoin tests its all-time high again.
Notably, the series of GBTC outflows coincided with reports of the bankrupt crypto lender Genesis liquidating its GBTC holdings.
This sell-off could be nearing its end, potentially easing the downward trends observed in ETFs.
Investor Alistair Milne highlighted a significant slowdown in GBTC selling, leading to a decrease in net outflows from Bitcoin ETFs to -$51.6 million. Milne’s observation raises the possibility of a momentum shift in the market.
Supporting this perspective, statistician Willy Woo introduced a new model that correlates ETF inflows with Bitcoin’s price movements, suggesting the most intense selling phase might have concluded.
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Woo anticipates continued market choppiness leading up to the Bitcoin halving event, echoing a sentiment for potential consolidation.
Echoing optimism, WhalePanda, a pseudonymous commentator, predicts a sideways market trend, potentially setting the stage for Bitcoin’s ascent to new all-time highs.
The commentator points to a significant demand for Bitcoin inflows to match the coin’s daily emission rate, which is expected to halve soon, further tightening supply.
However, GBTC faces criticism for its diminishing assets under management (AUM), now holding just half of its AUM since its ETF conversion.
Critics argue that GBTC’s reduction is beneficial for the Bitcoin ecosystem, with Vijay Boyapati blaming it for market instability and hindering Bitcoin’s growth.
Despite these challenges, spot Bitcoin ETFs have been historically successful, amassing $12.15 billion in cumulative flows.
Cathie Wood of ARK Invest anticipates more institutional engagement in the near future, signaling continued interest and investment in Bitcoin.
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Bitcoin has recently experienced a significant pullback, dropping over 10% from its all-time high, amidst signs of slowing demand for spot Bitcoin exchange-traded funds (ETFs).
Bloomberg reported on Friday that analysts from JPMorgan Chase and Co. are cautioning that this downward trend could continue.
This sentiment is reflected in the substantial outflows from a group of 10 spot Bitcoin ETFs, marking the largest four-day withdrawal since these products were launched on January 11.
As it stands, Bitcoin is navigating through one of its most challenging weeks this year, with a 4% decrease in value, and is currently trading at approximately $65,400.
JPMorgan strategists, including Nikolaos Panigirtzoglou, are maintaining their stance that Bitcoin remains overbought.
They had previously forecasted in February that the cryptocurrency’s price could face further declines, especially with the approaching halving event in April, which will cut the supply of Bitcoin from mining.
These strategists point to the combination of sustained open interest in CME Bitcoin futures and the dwindling ETF flows as clear bearish indicators.
They noted, “The pace of net inflows into spot Bitcoin ETFs has slowed markedly, with the past week seeing a significant outflow.
“This challenges the notion that the spot Bitcoin ETF flow picture is going to be characterized as a sustained one-way net inflow.”
They anticipate continued profit-taking as the halving event nears, especially given the current overbought market positioning.
Moreover, last month, JPMorgan predicted a potential decline in Bitcoin’s price to around $42,000 post-April, as the excitement around the halving event fades.
Despite reaching a peak of nearly $73,798 on March 14, the enthusiasm among retail traders appears to be diminishing, as highlighted by Naeem Aslam, chief investment officer at Zaye Capital Markets.
He remarked, “The fact that the rally didn’t really take off from the all-time high like before made many question the strength of the rally.”
Conversely, investment firm Bernstein has upgraded its year-end forecast for Bitcoin to $90,000 from $80,000, buoyed by the cryptocurrency’s recent performance and the initial reception to new spot BTC ETFs.
Analysts Gautam Chhugani and Mahika Sapra from Bernstein have expressed optimism, citing the onset of a new BTC bull cycle, robust inflows into ETFs, expansion of miner capacity, and record miner revenues.
These elements collectively bolster the attractiveness of Bitcoin miners as investment avenues for equity investors interested in the cryptocurrency space, even as Bernstein revises its expectations for the April halving event.
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In a landmark case, Jian Wen, a former hospitality worker, has been convicted of money laundering in a UK court specializing in significant fraud cases, following the discovery of a staggering $2.5 billion in Bitcoin under her control.
The Southwark Crown Court’s ruling came after a detailed investigation into Wen’s financial activities, which included the purchase of luxury properties and expensive jewelry.
This investigation examined 48 electronic devices and thousands of files, many in Mandarin, the BBC reported.
Wen’s sudden shift in lifestyle from residing above a Chinese restaurant to renting a lavish six-bedroom house in North London, with a monthly rent of $21,420, signaled the authorities to her trail.
Moreover, her attempt to buy a $30 million mansion in London was a critical lead that prompted further scrutiny by the officials, Cointelegraph noted.
Wen’s ambitious real estate ventures in London, coupled with her inability to pass money-laundering checks despite claiming substantial earnings from Bitcoin mining, raised suspicions.
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The UK police branded the case as the largest Bitcoin seizure in the country, with Wen convicted for her involvement in a money laundering arrangement, awaiting sentencing on May 10.
Chief Crown Prosecutor Andrew Penhale stressed the growing use of cryptocurrencies like Bitcoin in criminal operations, facilitating asset disguise and transfer by fraudsters.
Contrary to the authorities’ stance on cryptocurrencies being widely used for money laundering, a recent US Treasury Department report argued that cash remains the preferred medium for such illicit activities, due to its anonymity and stability.
Adding to the discourse, Nasdaq’s “Global Financial Crime Report” shed light on the financial crime landscape, noting that approximately $3.1 trillion in illicit funds circulated through the global financial system in 2023.
Interestingly, the report did not specifically mention Bitcoin or cryptocurrencies, indicating a broader perspective on financial crime beyond the digital currency realm.
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Bitcoin investors often crave the excitement of market volatility but usually find the reality less thrilling, especially when a surge in prices is swiftly followed by a sharp downturn.
This often results in forced liquidations of futures contracts, exacerbating the fall in Bitcoin’s value.
The Bitcoin futures market, vital for traders wanting to leverage their positions, grows in significance with its expansion, influencing Bitcoin’s price more markedly.
Recently, the aggregate open interest in Bitcoin futures soared to an all-time high of $36 billion on March 21, a significant increase from $30 billion just two weeks earlier.
Leading the charge, the Chicago Mercantile Exchange (CME) recorded $11.9 billion in open interest, overshadowing the inflow to U.S. spot Bitcoin exchange-traded funds (ETFs) since their launch.
Despite the advent of spot ETFs—which some expected would dampen volatility given their $3 billion average daily trading volume—Bitcoin’s volatility has escalated, contrary to these expectations.
Over the last four weeks, Bitcoin’s 30-day volatility index shot past 80%, the highest in over 15 months, starkly contrasting with the lower volatility seen in traditional markets and even in stocks known for their unpredictability.
This heightened volatility was highlighted by a dramatic price correction on March 19, followed by a significant recovery the next day, leading to substantial liquidations in the futures market.
Such volatility not only affects traders but also impacts the general perception of Bitcoin’s risk and its market trajectory.
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The futures market serves as a double-edged sword, offering opportunities for leveraged positions but also presenting risks of sharp corrections and liquidations.
This dynamic can lead to short-term buying pressure if the market reverses from bearish bets, contributing to the observed volatility.
Some analysts point to excessive leverage or market manipulation as causes, with instances where market movements in related sectors seemingly coincide with major Bitcoin price shifts, though the motivations behind such movements remain speculative.
To understand the impact of futures on Bitcoin’s price, examining the premium on monthly contracts is crucial.
These contracts, favored by professional traders for their lack of a funding rate, command a significant premium over spot prices, reflecting market sentiment.
Despite a recent price dip, the sustained high premium on futures contracts indicates a bullish stance among traders, yet the risk of forced liquidations looms large, especially with the substantial open interest in the market.
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On March 21, Bitcoin maintained its upward trajectory, buoyed by a quick recovery that delivered a 12% increase in its price.
This uptick followed a period of consolidation within a tight range, sparked by a favorable response to comments made by the United States Federal Reserve, which opted to keep interest rates steady.
The Federal Reserve’s decision came after the Federal Open Market Committee (FOMC) meeting, with Chair Jerome Powell indicating potential rate cuts later in the year.
He stated it would be “appropriate” to initiate such cuts once there was greater confidence in inflation moving sustainably towards the 2% target.
A press release underscored this stance, emphasizing patience until there’s more certainty about the inflation trajectory.
This development helped Bitcoin avoid a drop below the $60,000 support level, propelling it to $68,000 and negating its recent losses.
The sentiment was encapsulated by a popular trader, Jelle, on X (formerly Twitter), who highlighted the importance of staying above $65,300 for Bitcoin to potentially revisit its 2021 cycle highs.
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This surge inflicted significant losses on short sellers, with CoinGlass reporting $70 million in short BTC liquidations on March 20.
Despite new withdrawals from U.S. spot Bitcoin exchange-traded funds (ETFs), market morale remained strong.
Farside, a UK investment firm, noted that $261 million exited new ETF products on March 20, largely due to $386 million in outflows from the Grayscale Bitcoin Trust (GBTC), even as other ETFs experienced inflows.
Market commentators expressed optimism amidst these developments. Dyme, a well-regarded voice, observed Bitcoin’s resilience against the backdrop of ETF outflows, suggesting the market’s independence from ETF movements.
Similarly, Samson Mow, CEO of crypto adoption firm Jan3, opined that ETF outflows would inevitably reverse, encouraging investors to plan with this future shift in mind.
These perspectives underscore a growing belief in Bitcoin’s enduring appeal and its capacity to withstand market fluctuations.
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Grayscale, a leading crypto asset manager, is experiencing a notable decline in investments in its Bitcoin exchange-traded fund (ETF), with recent data showing significant outflows.
On March 21, the Grayscale Bitcoin Trust (GBTC) reported outflows of $358.8 million.
This event comes on the heels of a record-breaking $642 million outflow on March 18, according to Farside Investors.
Over the past week, GBTC has seen a total of $1.8 billion in withdrawals, marking a trend of persistent outflows across the cryptocurrency ETF sector for four consecutive days.
Despite these significant outflows, experts believe this trend could be nearing its end.
Eric Balchunas, a Senior Bloomberg ETF analyst, suggested on March 21 that the majority of the outflows, particularly from the recent bankruptcies within the crypto industry, might be concluding due to their “size and consistency.” H
e further speculated that the outflows could be linked to bankrupt firms purchasing Bitcoin with cash, which could be stabilizing the market.
Balchunas optimistically noted that once this period is over, the market might only see retail-driven flows, similar to those observed in February.
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Adding to the discussion, an independent researcher known as ErgoBTC pointed out that around $1.1 billion of the recent GBTC outflows likely originated from Genesis, a bankrupt crypto lender.
The researcher highlighted the timing and volume of transactions between GBTC and Genesis as evidence of their correlation.
WhalePanda, a pseudonymous crypto market commentator, echoed this sentiment, referring to a statement from Genesis about returning assets to creditors by converting GBTC shares into Bitcoin.
The selling pressure on GBTC has been further amplified by major liquidations in the crypto industry.
On February 14, Genesis received court approval to liquidate its $1.3 billion in GBTC shares to repay creditors.
Additionally, the bankrupt cryptocurrency exchange FTX liquidated all of its 22 million GBTC shares, valued at nearly $1 billion, just a month earlier.
As of March 21, Grayscale reported its Bitcoin Trust holds assets under management worth $23.2 billion, despite a $13.6 billion reduction since its conversion to an ETF on January 11.
These developments reflect the volatile nature of the cryptocurrency market and the interconnectedness of its participants.
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Despite a recent 15% drop from its all-time high of $73,738, analysts are optimistic about Bitcoin’s price surge following its upcoming halving event.
Charles Edwards, founder of Capriole Fund, addressed the volatility surrounding these periods in a March 19 X post, suggesting the year post-halving offers the best “risk-reward” for investors.
He anticipates the halving, expected between April 18 and 20, will lead to the shutdown of less efficient mining operations.
On 20, Bitcoin’s value dipped to $61,593 and has seen a slight recovery to $62,690, according to CoinGecko. Edwards remains hopeful for future price increases, citing a combination of reduced supply growth and increasing traditional finance (Tradfi) interest as key drivers.
In contrast, Ki Young Ju, CEO of CryptoQuant, attributes Bitcoin’s market dynamics to spot exchange-traded fund (ETF) flows rather than the halving itself.
He predicts mining expenses will soar post-halving, necessitating a price point that ensures profitability for miners, with direct costs per coin expected to hit around $37,000.
Crypto analyst Rekt Capital, sharing insights with over 430,000 followers on X, predicts further price drops but maintains a bullish outlook.
He indicates that Bitcoin is in a “danger zone” for pre-halving declines, referencing historical patterns.
Previous halvings saw significant price retractions before recovery; the 2020 event witnessed a 50% pullback attributed partly to the COVID-19 pandemic, with the market stabilizing around $10,000 thereafter.
The 2016 halving resulted in a 33% decrease in Bitcoin’s value, setting the stage for substantial gains by year-end and a bull market in 2017 with a peak of $20,000.
The 2024 halving enters somewhat unexplored territory, given Bitcoin’s current price levels and enhanced institutional support, particularly from spot Bitcoin ETFs, marking a departure from past trends.
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In 2023, Bit Digital, a prominent Bitcoin mining company listed on the Nasdaq, reported a notable increase in its earnings, with a 39% rise to $44.9 million compared to the previous year.
The firm disclosed that it mined 1,507.3 BTC during the year, marking a 21% increase from 2022, valued at approximately $97 million at the current market rates.
This growth in revenue and mining output was attributed to an enhanced active hash rate, although challenges such as increased network difficulty slightly offset these gains.
By the end of 2023, Bit Digital’s total assets amounted to $189.3 million, with shareholders’ equity standing at $152.7 million.
Furthermore, the company reported adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $12.4 million, alongside an adjusted earnings per share of $0.12.
Over the year, Bit Digital implemented several strategic adjustments to its mining hosting portfolio.
The company expanded its operations, ending the year with six hosting partners across seven sites in three countries.
A significant development was the extension of its activities to Iceland, a move aimed at benefiting from the region’s ample clean energy and favorable government policies.
This expansion underscores Bit Digital’s commitment to geographic diversification and the pursuit of cost-effective, carbon-neutral energy sources.
Amid fluctuating Bitcoin prices, Bit Digital remains focused on navigating the Bitcoin market’s cyclicality, eyeing sustained growth and resilience through all market phases.
The company anticipates that the trajectory of Bitcoin prices by the end of the year could set the stage for record highs in 2024.
Expanding beyond its core mining activities, Bit Digital announced its foray into artificial intelligence technology and digital infrastructure services.
This new venture includes offering rental services for graphics processing units (GPUs), marking a significant stride into digital service provision.
Notably, this diversification has already begun yielding financial benefits, with the company reporting $4 million in earnings from this new business segment in February 2024.
This strategic expansion reflects Bit Digital’s ambition to broaden its revenue streams and reinforce its position in the digital technology sector.
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On March 20, Bitcoin faced the possibility of dropping below $61,000 as experts cautioned that support levels might be on the verge of breaking.
According to data from Cointelegraph Markets Pro and TradingView, Bitcoin’s price experienced further declines, reaching a low of $60,760 on Bitstamp.
Currently, Bitcoin has fallen 17.5% from its peak, contending with selling pressure due to several significant challenges.
Reports have highlighted factors such as withdrawals from the U.S.’s spot Bitcoin exchange-traded funds (ETFs) and the Federal Reserve’s decision on interest rates on March 20 as key contributors to the downward pressure on Bitcoin’s value.
Although the outcome of the Federal Open Market Committee (FOMC) meeting seems predictable, much attention is focused on Fed Chair Jerome Powell’s remarks for clues on the future of risk assets.
The Kobeissi Letter, a trading analysis source, remarked on the situation via X (formerly Twitter), stating, “With the Fed meeting less than 24 hours away, it’s unlikely the Fed changes rates tomorrow.
“However, all eyes will be on guidance after the recent events. We maintain the view that it is far too soon to pivot.”
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“Current projections from CME Group’s FedWatch Tool indicate only a 1% probability of a policy shift at the March 20 meeting, with a slight increase to 9.1% for the subsequent meeting in May.
“The situation is further complicated by consecutive days of net outflows from spot Bitcoin ETFs, according to data from the UK-based investment firm Farside.
Despite the outflows from the Grayscale Bitcoin Trust (GBTC) being less than the record $642 million on March 19, the reduced inflows to other ETF products resulted in underwhelming overall statistics.
Financial commentator Tedtalksmacro noted, “Almost $500M USD has flowed out of spot BTC ETFs in the past two trading days,” attributing the slowdown to traders’ cautious stance ahead of the FOMC meeting and the impact of tax season in the U.S.
He suggested, “Regular programming will resume, but some chop first.”
QCP Capital, in its daily bulletin to Telegram subscribers, pointed out the potential significant impact of the second consecutive day of net outflows on Bitcoin’s price stability, raising concerns over the ability of inflows to other ETFs to counterbalance the outflows and questioning whether this could lead to a net positive outcome.
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The introduction of spot Bitcoin exchange-traded funds (ETFs) has significantly altered the landscape for both institutional and retail investors, leading to a divided market and impending shifts.
Retail investors, especially those new to Bitcoin, are increasingly investing through advisors in spot BTC ETFs, potentially making Bitcoin a common asset in household portfolios alongside traditional investments like gold.
Conversely, early adopters and enthusiasts of Bitcoin, who value its decentralization and resistance to censorship, feel their pioneering advantage is diminishing as mainstream adoption grows.
The essence of Bitcoin, from the perspective of its early supporters, seems compromised as it becomes integrated into the financial system it aimed to disrupt.
This situation is likened to a once-exclusive restaurant becoming too popular and corporatized, losing its original charm and purpose.
The finite nature of Bitcoin means its price is likely to increase as demand grows, but significant profits are poised to go to large asset managers handling the spot BTC ETFs, contrary to the decentralized ethos of Web3.
This scenario has led to a polarization within the crypto market: traditional investors entering through regulated financial products and long-standing crypto advocates seeking untethered access to blockchain technologies.
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This division is prompting a shift towards altcoins, spurred by the desire for diversification, higher returns, and adherence to the foundational principles of cryptocurrency.
Recent trends indicate a potential shift in market dynamics, with altcoins showing signs of gaining against Bitcoin, hinting at a forthcoming period of growth.
This movement could redefine the crypto landscape, elevating certain altcoins to prominence and reshaping investment strategies.
Although Bitcoin may remain a stabilizing force in investors’ portfolios due to its lower volatility, a shift towards more decentralized and potentially more lucrative alternatives is likely.
This realignment benefits institutions regardless of retail investor strategies, as the inherent scarcity and demand for Bitcoin ensure its price resilience.
However, a shift towards altcoins could significantly impact the decentralized finance (DeFi) sector, potentially catalyzing rapid growth beyond its current valuation.
As the market continues to evolve, investors on both sides of the divide face a dynamic and potentially rewarding future.
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