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Bitcoin today took a hit—falling well below its fresh all-time high to under $69,000 per coin.
The biggest digital coin by market cap has since recovered and is back above $70,000 at time of writing. But it's significantly below the $73,700 level it hit yesterday, CoinGecko shows.
Bitcoin has been on a roll thanks to the massive success of new spot Bitcoin exchange-traded funds (ETFs). But then data dropped on Thursday from the Labor Department's Bureau of Labor Statistics showing that the producer price index jumped 0.6% last month.
The important inflation indicator showed that prices were higher than expected in February. Traders interpreted this data as a sign that the Federal Reserve might not cut interest rates in May—leading to a sell-off of digital assets and stocks.
Another possible factor? Around $400 million in Bitcoin was shifted by Grayscale to its custodian, Coinbase, Arkham Intelligence data showed today.
"I think the inflation narrative is playing a part, but also, perhaps there is more Grayscale selling than usual—but we won’t know that for sure until tomorrow," he said.
In January, the fund manager was getting rid of a huge amount in digital coins, at one point moving $2.2 billion in a matter of days to the exchange. This led to downward pressure on the price.
Grayscale started shifting its BTC to Coinbase for selling after it converted its fund into a BTC exchange-traded fund (ETF) on January 10.
James Butterfill, Head of Research at Coinshares, told Decrypt both developments are factors.
Before Grayscale's Bitcoin Fund ETF conversion, it operated like a closed-end fund, and investors had to hold their shares for at least six months.
Now it's an ETF, investors have been keen to redeem their holdings and take home profits. It's likely they're doing so again.
Despite the Grayscale redemptions, net inflows for the nine other ETFs trading passed the $1 billion mark—a record—on Tuesday.
Edited by Ryan Ozawa.