Bitcoin Rally Slows as Market Weighs FED, Inflation, and Halving Impact

Bitcoin price rebounded amid anticipation of the halving event, trading above key levels at approximately $70,548. While inflows into digital asset investment products have slowed and outflows from Bitcoin ETFs have set a record high, on-chain activity has declined, indicating a potential slowdown in the token's rally and increased volatility in the future.

Is Bitcoin's Rally on Pause?

Bitcoin's upward trajectory continued on Tuesday, with a 4.5% jump to $70,548.1. The digital asset remained close to its record high set earlier this year, buoyed by anticipation of the upcoming halving event.

Fed, Inflation Jitters Weigh on Gains

However, the token's ascent was tempered by a strengthened dollar due to anticipation of upcoming cues on U.S. inflation data and the Federal Reserve's stance.

Halving Event: A Shot in the Arm

Much of Bitcoin's recent momentum stems from the impending halving event, which will reduce the token's supply by 50%. The highly anticipated event is expected to occur in April.

ETFs Witness Record Outflows

Despite Bitcoin's price surge, digital asset investment products experienced record outflows of nearly $1 billion last week, according to CoinShares. This included substantial redemptions from Grayscale Bitcoin Trust (GBTC), signaling some investor hesitation.

On-Chain Data Reveals Sluggish Activity

On-chain data from Glassnode suggests that Bitcoin blockchain activity has slowed significantly, despite the token's price rise. The firm's analysts noted that on-chain transactions were a fraction of those seen during the 2021 bull run, indicating a reluctance among major holders to part with their tokens.

Price Speculation Drives Rise

The muted on-chain activity suggests that Bitcoin's recent price action may be driven more by outside speculation than blockchain-based trading. This trend could lead to increased volatility in the weeks ahead, particularly if capital inflows diminish.

Cautious Investors Weigh Volatility

The volatility associated with Bitcoin remains a primary concern for potential investors, as the token's ability to reach record highs has been matched by its propensity to shed gains equally swiftly.