- The US government has moved some of the seized BTC.
- Traders remained relatively bullish as long positions dominated the market.
Bitcoin [BTC] has been stagnant around $30,000-$31,000 for quite some time. While many holders are 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 prevailing optimism among holders about Bitcoin’s future prospects, there is a possibility of an impending negative shift. This is because the United States government sent approximately 9,800 Bitcoins to Coinbase on July 2.
US government Bitcoin has moved 🚨
It’s later than expected, and this time no false rumor.
A transaction of 9,318 BTC has been moved to block 798406. This brings their current balance to 194,695 BTC.https://t.co/gqWrKpIWrY https://t.co/jJiCgDmt9H pic.twitter.com/E1LRJRtFyP
— Maartunn (@JA_Maartun) July 12, 2023
Assuming that the amount transferred today will eventually be sold, the above tweet implies that approximately 31,600 BTC remain to be liquidated by the US government.
Nevertheless, the timing of these forthcoming batches remains uncertain given the significant interval observed between the first and second batches.
As of today, the United States government holds an estimated Bitcoin balance of 194,188 BTC, worth approximately $5.96 billion. This amount accounts for about 1% of Bitcoin’s circulating supply.
Source: Dune analysis
Deja Vu?
It is worth noting that prior to this incident, the US government had previously performed a similar maneuver involving its holdings. On March 7, the government initiated the first transfer, sending approximately 9,900 BTC to Coinbase.
A subsequent lawsuit confirmed that the aforementioned 9,900 BTC was successfully sold later on March 14. In addition, it was stated that the remaining seized BTC, totaling approximately 41,000 BTC, would be liquidated in four consecutive installments.
This series of actions had a major impact on market sentiment and led to a substantial drop in funding rates. Interestingly, this drop led a notable number of investors to short Bitcoin.
Despite these circumstances, Bitcoin’s price experienced only a modest decline, from about 21,000 to 19,000, reflecting a marginal swing from 2,000.
After this, according to CryptoQuants data, a phenomenon known as a significant short squeeze occurred.
A short squeeze occurs when a heavily shorted asset experiences a sudden increase in price. This leads short sellers to buy the asset to cover their positions.
In the case of Bitcoin, when investors shorting Bitcoin witnessed the price surge, they were forced to buy Bitcoin. This ultimately drives up the price even more.
These events usually also increase market volatility.
Source: CryptoQuant
How will the market react this time?
At the time of writing, the number of long positions taken for BTC exceeded short positions according to data from Coinglass. However, the percentage of long positions steadily decreased.
In the past few hours, the percentage of long positions taken in favor of Bitcoin has fallen from 57.22% to 51.77%.
Source: mint glass
In addition, Bitcoin’s ATM (At-The-Money) 7-day implied volatility experienced an increase from 36.2% to 40.25% in the past few days.
A high IV suggests that the market expects significant price swings in the future. This indicates increased uncertainty and the potential for greater price swings in the underlying asset.
Thus, traders and investors may interpret a high IV as an indication of higher risk or the possibility of lucrative trading opportunities.
Source: The Block
Despite the uncertainty that could be caused by the actions of the US government, the overall social outlook for Bitcoin remained positive at the time of writing.
Santiment’s weighted sentiment indicator showed that the negative sentiment for Bitcoin was quickly receding.
Source: Sentiment
A major reason why optimism for Bitcoin remained high despite this sell-off would be institutional interest in BTC.
Settings continue to push
Companies such as BlackRock, WisdomTree, and 21Shares have been diligently pursuing Securities and Exchange Commission (SEC) approval to launch a Bitcoin spot ETF.
Despite initial rejections, these companies persisted and made necessary revisions to their proposals, consistently submitting updated versions to the SEC.
Read Bitcoin [BTC] Price forecast 2023-2024
That reports Bloomberg ETF analyst Eric Balchunas$30 trillion in capital could suddenly be unlocked for the Bitcoin market if a Bitcoin spot ETF were approved by the SEC. This move will not only benefit Bitcoin, but the crytp0 markets as a whole.
Only time will tell if this event will shake up the bears, or if institutional interest will continue to support the king coin.