Bitcoin experiences a dip, dropping below $69,000 following inflation data and significant Grayscale sell-offs. Despite this, ETF inflows hit a record high.

"Bitcoin experienced a significant drop today, slipping below its recent peak to under $69,000 per coin.

However, the primary digital currency by market capitalization has rebounded since then, now surpassing $70,000 at the time of this composition. Nevertheless, it remains notably lower than yesterday's peak of $73,700, according to CoinGecko data.

The surge in Bitcoin's value can be largely attributed to the remarkable success of newly introduced spot Bitcoin exchange-traded funds (ETFs). Nonetheless, market sentiment took a turn on Thursday when the Labor Department's Bureau of Labor Statistics unveiled data indicating a 0.6% surge in the producer price index last month.

This crucial inflation metric revealed that prices exceeded expectations in February. Consequently, traders interpreted this revelation as a signal that the Federal Reserve might not reduce interest rates in May. This perception triggered a sell-off of digital assets and stocks.

Another potential factor contributing to Bitcoin's fluctuation is the movement of approximately $400 million in Bitcoin from Grayscale to its custodian, Coinbase, as per data from Arkham Intelligence.

Commenting on the situation, an analyst remarked, "I believe the inflation narrative is exerting influence, but there may also be increased selling by Grayscale—although confirmation awaits tomorrow."

Notably, in January, Grayscale was observed divesting a substantial amount of digital assets, at one point transferring $2.2 billion within a few days to the exchange. This activity exerted downward pressure on prices.

The shift of Grayscale's BTC to Coinbase for sale commenced subsequent to the conversion of its fund into a Bitcoin exchange-traded fund (ETF) on January 10.

James Butterfill, Head of Research at Coinshares, highlighted that both of these developments are contributing factors.

Before the conversion of Grayscale's Bitcoin Fund into an ETF, it functioned as a closed-end fund, necessitating investors to hold their shares for at least six months.

Now operating as an ETF, investors have displayed eagerness to redeem their holdings and secure profits. It appears they are doing so once again.

Despite the redemptions from Grayscale, net inflows for the remaining nine ETFs exceeded the $1 billion milestone—a historic achievement—on Tuesday.