Financial Insights That Matter
Reports of the U.S. possibly liquidating most of its Bitcoin holdings seized from the Silk Road darknet marketplace may be more impactful for short-term traders than for long-term spot holders, according to a market analyst.
What Happened: Pseudonymous cryptocurrency analyst When stated on X on Thursday that this type of news tends to cause mass liquidations in the derivatives markets due to increased volatility, but doesn’t necessarily have a negative impact on the underlying value of the asset for spot holders.
The U.S. Department of Justice has received clearance from a federal judge to sell 69,370 Bitcoin BTC/USDvalued at roughly $6.5 billion, justified by the price volatility of the asset.
Also Read: Gary Gensler Says 10,000-15,000 Projects Won’t Survive, Crypto Market Is ‘Wrapped Up In Sentiment’
Why It Matters: This decision comes despite President-elect Trump’s support for cryptocurrencies and his opposition to the government selling its Bitcoin reserves.
Noted Bitcoin critic Peter Schiff suggested the move is the Biden administration preemptively selling off the government-owned Bitcoin holdings ahead of the incoming administration.
He believes this is a move to undermine Trump’s stance on digital assets, who was opposed to the selling of Bitcoin but did not promise to buy more.
The U.S. government holds 198,109 BTC, currently valued at $18.6 billion.
This news has sparked fears of a major market downturn, with Bitcoin trading at $92,500, down 3.5% over the past 24 hours.
Still, Kun pointed out that these large-scale sales are often absorbed by the market over time, especially when the fundamental factors driving the demand for Bitcoin remain unchanged.
The analyst argues that fluctuations may trigger liquidations of over-leveraged positions, particularly in futures and options contracts.
Thus, the initial impact may disproportionately affect traders using high leverage, who can quickly find their positions wiped out in such volatile conditions.
Kun emphasized that spot holders, who own the actual Bitcoin rather than leveraged contracts, are not exposed to the same risks and are not subject to such liquidation events.
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