Bitcoin: Uncle Sam makes moves – what about your holdings?
- The U.S. government moved some of its seized BTC.
- Traders remained relatively optimistic as long positions dominated the market.
Bitcoin [BTC] has been stagnating around the $30,000 – $31,000 mark for quite some time. Even though many holders have been hopeful about the future of the king coin, things could soon take a turn for the worse.
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Uncle Sam makes a move
Despite the prevailing optimism among holders regarding Bitcoin’s future prospects, there is a possibility of an impending negative shift. This is because on 2 July, the United States Government dispatched approximately 9,800 Bitcoins to Coinbase.
Bitcoin from US Government has moved ?
It’s later than expected, and this time not a false rumour.
— Maartunn (@JA_Maartun) July 12, 2023
Under the assumption that the quantity transferred today will eventually be sold, the tweet above implies that approximately 31,600 BTC remain to be liquidated by the U.S government.
Nevertheless, the timing of these forthcoming batches remains uncertain, given the considerable interval observed between the initial and second batches.
As of today, the United States Government possesses an estimated Bitcoin balance of 194,188 BTC, valued at approximately $5.96 billion. This amount accounts for approximately 1% of Bitcoin’s circulating supply.
It is worth noting that prior to this incident, the U.S. government had previously executed a similar maneuver involving its holdings. On 7 March, the government initiated its initial transfer, dispatching approximately 9,900 BTC to Coinbase.
A subsequent court filing confirmed that the aforementioned 9,900 BTC was successfully sold later on 14 March. Additionally, it was stated that the remaining seized BTC, totaling around 41,000 BTC, would be liquidated in four subsequent installments.
This series of actions had a profound impact on market sentiment, leading to a substantial decline in funding rates. Interestingly, this decline prompted a notable number of investors to engage in short-selling of Bitcoin.
Despite these circumstances, the price of Bitcoin only experienced a modest decrease, dropping from approximately 21,000 to 19,000, reflecting a marginal fluctuation of 2,000.
Following this, according to CryptoQuants’ data, a phenomenon known as a significant short squeeze transpired.
A short squeeze occurs when a heavily shorted asset experiences a sudden price surge. This leads short sellers to buy the asset to cover their positions.
In the case of Bitcoin, when investors who shorted Bitcoin witnessed its price rise, they were forced to buy Bitcoin. This ends up driving the price up even more.
These events usually create higher market volatility as well.
How will the market react this time around?
At press time, the number of long positions taken for BTC outweighed the shorts according to data provided by Coinglass. However, the percentage of long positions was steadily declining.
In the last few hours, the percentage of long positions taken in favor of Bitcoin fell from 57.22% to 51.77%.
Furthermore, over the past few days, the ATM (At-The-Money) 7-day Implied Volatility of Bitcoin experienced an increase from 36.2% to 40.25%.
A high IV suggests that the market expects significant price fluctuations in the future. This indicates increased uncertainty and the potential for larger price swings in the underlying asset.
Traders and investors may thus interpret a high IV as an indication of higher risk or the possibility of lucrative trading opportunities.
Despite the uncertainty that could be caused by the U.S. government’s actions, the overall outlook for Bitcoin on the social front remained positive at the time of writing.
Santiment’s weighted sentiment indicator showed that the negative sentiment for Bitcoin was declining rapidly.
One major reason why optimism for Bitcoin remained high despite these sell-offs would be the institutional interest being shown for BTC.
Institutions keep pushing
Firms including BlackRock, WisdomTree, and 21Shares have been diligently pursuing approval from the Securities and Exchange Commission (SEC) for the launch of a Bitcoin spot ETF.
Despite facing initial rejections, these companies persisted and made necessary revisions to their proposals, consistently submitting updated versions to the SEC.
Read Bitcoin’s [BTC] Price Prediction 2023-2024
According to Bloomberg ETF analyst Eric Balchunas, $30 trillion worth of capital could suddenly unlock for the Bitcoin market if a Bitcoin spot ETF was to be approved by the SEC. This move will not only benefit Bitcoin but also the crytp0 markets as a whole.
Only time will tell whether this event will awaken the bears, or if institutional interest will continue to support the king coin.