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Cryptocurrency Market Update

Cryptocurrency prices were mixed early Wednesday as bitcoin works its way back toward Tuesday’s record highs. Tuesday’s steep pullback was only temporary, experts forecast, with the next halving event on the horizon. Meanwhile, spot bitcoin ETFs logged a record day in terms of trading volume.

Bitcoin’s volatile nature was on full display this week, as the cryptocurrency encountered resistance while struggling to hold its first new highs in almost 28 months. Bitcoin rallied as high as $69,208 Tuesday before reversing near $59,700. BTC rose back above $65,000 early Wednesday, but still clocked more than a 3.5% decline over the past 24 hours, CoinDesk data shows.

Technical resistance, or price resistance, tends to occur when an asset rises to a level that spurs some holders to take profit. Investors who bought at or near the November 2021 high and held on through the crypto winter could be selling to finally take some profit or maybe simply to break even. Investors who bought during bitcoin’s run up of more than 300% from November 2022 lows could be choosing to lock in gains. That kind of profit taking accounts for why assets often reverse sharply from freshly minted record highs.

Still, bitcoin soared nearly 59% so far this year, with most of the gains coming after spot bitcoin ETFs launched in early January.

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Ethereum traded around $3,760 early Wednesday after peaking at $3,901 on Tuesday. ETH is trading at its highest level since early January 2022 and spiked more than 68% so far this year.

Bitcoin Outlook

Still, the upcoming halving event expected in April should drive prices even higher.

“Bitcoin demand is colliding with increasingly tight supply,” Zach Pandl, managing director of research at Grayscale Investments told IBD last week. Pandl noted that U.S. spot bitcoin ETFs pulled in an average of $212 million per calendar day in February. Meanwhile, the bitcoin network currently produces around 900 coins per day, or about $54 million worth of bitcoin based on a price of $60,000.

“Given the bitcoin halving in April, issuance will fall by half ÔÇö the equivalent of 450 coins or $27 million worth of bitcoin per day,” Pandl said. “There is simply not enough bitcoin to accommodate all the new demand, and so natural supply/demand dynamics are driving prices even higher.”

Bitcoin ETF Flows

Spot bitcoin ETF prices broadly rebounded around 6% early Wednesday. Shares on Tuesday collectively fell around 8.5% as bitcoin reversed lower, after gaining 7.3% Monday.

The 10 spot bitcoin ETFs on Tuesday, excluding Hashdex’s DEFI, saw a record $10 billion in trading volume Tuesday, Eric Balchunas, Bloomberg ETF analyst reported, smashing the previous Feb. 28 record of about $6 billion.

BlackRock’s iShares Bitcoin Trust (IBIT) has been the clear leader in fund inflows since the spot bitcoin ETFs launched Jan. 11 with roughly $9.17 billion in inflows as of end of day March 5, according to BitMEX Research data. The Fidelity Wise Origin Bitcoin Fund (FBTC) ranks second at $5.35 billion in inflows. The ARK 21Shares Bitcoin ETF (ARKB) ranks third at $1.73 billion, followed by the Bitwise Bitcoin ETF (BITB) with about $1.27 billion in inflows.

Grayscale Bitcoin Trust (GBTC) has recorded $9.6 billion in outflows as of March 5, a large chunk of the outflows are due to remaining impacts from the crypto winter in 2022.

FTX at the end of January liquidated its GBTC position and sold about $1 billion worth of shares as part of its bankruptcy proceedings. Elsewhere, a U.S. District Court for the Southern District of New York on Feb. 14 approved bankrupt crypto lender Genesis to sell $1.6 billion in GBTC shares in an effort to repay creditors, Reuters reported.

“The Grayscale team anticipated GBTC’s diverse shareholder base would engage in profit-taking and deploy investment strategies that would impact the Trust’s flows, and we are pleased that outflows have continued to stabilize ÔÇö especially against forced selling from estate bankruptcies,” said Jennifer Rosenthal, vice president of communications at Grayscale. “With market-leading liquidity, strong trading volume, and an unparalleled track record, we expect GBTC will continue to be a primary capital markets risk transfer tool for bitcoin.”

Still, Grayscale remains the leader in terms of assets, with $25.37 billion in assets under management, followed by iShares Bitcoin Trust at $11.45 billion.

Despite GBTC’s outflows, the new ETFs have recorded $8.56 billion in inflows since launch, according to BitMEX Research.

Spot bitcoin ETF shares are trading above their Jan. 11 launch-day highs.

Crypto Stocks

Coinbase (COIN) surged 5.6% early Wednesday after dropping 5.4% Tuesday. COIN stock bolted 24.6% so far in 2024.

Bitcoin miners Marathon Digital (MARA) and CleanSpark (CLSK) continued sliding Wednesday after appearing to claw back some of their Tuesday losses in premarket trade.

MARA fell 2.3% Wednesday after jumping 5.7% premarket. Shares tumbled 13.4% Tuesday. CLSK shares eased more than 1% Wednesday morning after rising 5.2% premarket. CleanSpark dropped 6.9% Tuesday. Marathon Digital is down more than 5% for the year through Tuesday’s close. CleanSpark rallied nearly 39% year-to-date.

You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison

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