US Government-Related Sell-Off Pressure Is Coming to the Fore

Bitcoin (BTC) has erased all of its gains from the past week, approaching the $66,000 level earlier in the day.

Prices pulled back as a significant portion of the asset was moved out of wallets linked to the US government, sparking fears of selling pressure among traders. BTC lost as much as 5% before recovering after the US Marshals Service transferred $2 billion worth of BTC to two new wallets.

Data tracking platform Arkham estimates that at least one of these wallets is a custodial service. At the time of writing, Bitcoin is trading around $66,550, down 4.3%, while the CoinDesk 20 Index is down 3.5%.

Spot ether (ETH) exchange-traded funds recorded negative net flows as large outflows from Grayscale Ethereum Trust (ETHE) overwhelmed interest in rival products.

Bitcoin funds launched in January saw net inflows of $1 billion in the first four days, despite the massive outflows from the Grayscale fund. Spot ETH ETFs saw net outflows of $340 million, with more than $1.5 billion flowing out of the Grayscale Trust, according to Farside Investors.

Ether’s 5% drop over the past week appears to reflect the lackluster sentiment in ETFs.

Investment bank Jefferies emphasized in its research report published yesterday that the political side of crypto emerged with multiple politicians, both Republican and Democrat, and former president Donald Trump attending the Bitcoin Nashville conference last week.

“Trump’s promise to introduce crypto-friendly regulators to the industry could lead to the short-term BTC price being tied to the outcome of the US presidential election,” analysts Jonathan Petersen and Joe Dickstein wrote. Trump promised to maintain a strategic bitcoin reserve and never sell government-seized bitcoins during his speech in Nashville. Jefferies recalled that Trump promised to select crypto-friendly regulators, create a crypto industry presidential advisory council, and make the country the “crypto capital of the planet.”