The bitcoin that was sold was linked to the Silk Road seizure. The sale also caused market volatility and temporarily pushed the price of bitcoin below $93,000. Additionally, on-chain data showed large moves of bitcoin to exchanges at a loss, and over millions of leveraged long positions were liquidated. Some analysts are now predicting a potential drop below $90,000 before a rally to $126,000. Meanwhile, Oklahoma Senator Dusty Devers introduced the Bitcoin Freedom Act to enable bitcoin payments.
$6+ Billion in Bitcoin Sold by US Government
The US government liquidated 69,370 bitcoins (BTC) seized from the Silk Road dark net market, valuing the move at $6.7 billion. The US Department of Justice (DoJ) approved the decision as part of resolving a prolonged ownership dispute with Battle Born Investments. The Justice Department cited the extreme volatility of Bitcoin prices as justification for approving the sale.
The US government’s wallet, which holds Bitcoin, saw its balance drop to zero on January 8. The timing of the sale raised eyebrows as it occurred just 10 days before Donald Trump returned to the White House.
The move also contradicts the Trump administration’s thinking about creating a strategic reserve of Bitcoin. Battle Born Investments lost its claim to the assets through its bankruptcy estate, and criticized the decision as an abuse of the civil asset forfeiture process. Its legal team also condemned the Justice Department for the alleged procedural maneuver.
Bitcoin responded by falling below $93,000 and raising investor concerns about a further correction below $90,000. At press time, Bitcoin had recovered slightly to trade at $94,075. On-chain data also suggests that panic is growing among short-term Bitcoin holders.
Bitcoin ETFs Record Largest Outflows in 3 Weeks
Spot bitcoin ETFs in the United States recorded their largest outflows in the past three weeks on Jan. 8 as bitcoin briefly dipped below $93,000, sparking market-wide panic among investors.
The 12 spot bitcoin ETFs recorded $582.9 million in outflows on Tuesday, ending a three-day inflow streak that brought nearly $2 billion into the funds. Tuesday’s outflows also marked their highest level since Dec. 19, when the investment products saw outflows of $680 million.
Fidelity’s FBTC fund led outflows on Jan. 8, pulling $258.69 million from the fund, followed by ARK 21Shares’ ARKB fund, which saw outflows of $148.3 million. Even BlackRock’s IBIT fund, which managed to offset outflows from other BTC ETFs on its own the previous day, recorded outflows of $124.05 million yesterday,
Valkyrie BRRR and Bitwise BITB added to the negative momentum, pulling $14.1 million and $11.26 million from their respective funds. Invesco Galaxy’s BTCO, Grayscale’s GBTC, and Franklin Templeton’s EZBC recorded more modest outflows, amounting to $9.38 million, $8.94 million, and $8.17 million, respectively.
Bitcoin had recovered slightly to trade at $94,075. On-chain data also suggests that panic is growing among short-term Bitcoin holders.
The daily trading volume of these investment vehicles was $3.4 billion on January 8, significantly lower than the $4.62 billion recorded on the previous trading day.
The record outflows came on Tuesday as Bitcoin fell below $93,000 amid macroeconomic concerns, pointing to expectations of a more hawkish stance from the Federal Reserve after its recent minutes, which hinted at continued inflation under the incoming Trump administration.
Fed’s cautious approach to rate cuts amid inflation, economic risks
The minutes of the Federal Open Market Committee revealed a deliberate strategy to cut interest rates by 25 basis points (0.25%), reflecting a consensus among members to take a gradual approach to monetary easing. Despite the divergent views, the focus on data-driven decision-making remained dominant, with officials expressing the need for vigilance as inflation rates consistently exceeded targets.
The minutes stressed that “many participants suggested that a variety of factors underscored the need for a cautious approach to monetary policy decisions over the coming quarters,” revealing the cautious sentiment within the Fed’s ranks.
While some members called for flexibility in policy adjustments, which could lead to faster cuts in response to low inflation or weak labor markets, the prevailing sentiment was to prioritize caution. This philosophy aims to avoid policy mistakes as the Fed assesses the neutral rate alongside domestic economic challenges.
Officials highlighted inflation risks, noting that core personal consumption expenditures inflation reached 2.8% in October and that progress toward reducing the rate seemed slower than expected. “Inflation risks remain balanced, although recent higher-than-expected readings warrant close monitoring,” the minutes noted.
In addition, the low unemployment rate of 4.2% and the anticipated robust GDP growth raise growing concerns about financial pressures impacting lower-income households.
Markets React to Fed’s Trump Policies Insights
The FOMC minutes highlight clear concerns regarding President-elect Trump’s proposed trade and immigration policies, which they view as increasing inflation risks. Officials believe these factors could impede the Fed’s ability to effectively achieve its inflation and employment goals.
