Key Point
- The US government is holding about 41,000 Bitcoins, rumors about the US government adjusting its position created hysteria in the community
If you’re closely watching the market on Wednesday, you must have witnessed incredible volatility in the market that happened within a few minutes. Bitcoin plummeted by $1,000 within a few minutes.
Bitcoin Takes a Hit On Rumor that US Government Is Selling Crypto
On Thursday, a Twitter user posted a tweet about the US government adjusting its position on its Bitcoin, this tweet spurred hysteria in the community, and traders were prompted to sell faster than hot cake at a pancake festival.
The tweet(now deleted) rumored that the “US government wallet is on the move,” and at the time of the tweet, Bitcoin was trading at $28,200; a few minutes after the tweet, Bitcoin plummeted by roughly $1,000, indicating that traders were panicking about the rumor.
Is the US Government’s Shorting Position Worth the Hysteria?
No doubt the tweet affected the price of Bitcoin, which has reacted positively to the US consumer price index released on Wednesday after some days of no particular direction of the price of Bitcoin.
The US government is holding a considerable portion of cryptocurrency, which of course the effect should not be underestimated by traders whenever the US government is looking to reposition its holding.
In early April, MyCryptoParadise reported that the US government had made over $200 million from selling Bitcoin in March alone, most of which is from crypto seizures; as per the filing, the US government is planning to liquidate the remaining holdings(41,000 BTC) before the year runs out, this is why the tweet caused panic, and many traders might have thought the effect of the quantity of Bitcoin to be released into the market may plunge the Bitcoin price.
“The Government understands [the seized Bitcoin] is expected to be liquidated in four more batches over the course of this calendar year,” the filing noted at the time.
Another likely reason for the downturn of Bitcoin price is the rumor that the involvement of two major market makers, Jane Street and Jump Trading in crypto, was declining, leading to fear among traders that many of them might be looking to reposition themselves.
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