US-government-linked wallets moved 833.599 BTC (~$71.56M) on 7 October inside a roughly nine-hour window, and $BTC slid to roughly $83,577-83,800 overnight with about $400-404M of liquidations landing inside one hour. Everyone's asking why the government is moving coins at all if the Strategic Bitcoin Reserve isn't supposed to sell, and I think the answer is in where these particular coins came from.
Where the coins came from
Arkham's labels put ~568.7 BTC from the Potapenko/Turogin forfeiture and ~264.9 BTC traced to the Bitfinex case. The coins sat in two unlabelled addresses first, and within hours both passed them on to Coinbase Prime deposit addresses. So it's two separate forfeiture cases, and which case a coin comes from decides which legal pipe it sits in.
Executive Order 14233 sends forfeited bitcoin into the reserve for long-term custody, and its "shall not be sold" language covers coins once they're in the reserve. Victim restitution sits upstream of that. The DOJ has hired an administrator for its victim-remission process and says the launch depends partly on liquidating forfeited assets, so a forfeited coin with an identified victim can be sold to fund remission without the reserve's no-sell language ever reaching it.
The Bitfinex part is the clearest case. Roughly 94,636 BTC tied to the 2016 hack, about 30% of the reserve, is still inside victim-claim proceedings, and a US court has ruled that seized BTC goes back to Bitfinex as the sole victim under voluntary restitution agreements. Coins from that case landing at a Coinbase Prime deposit address look a lot more like that restitution process at work than like a reserve disposal.
No sale has been announced, and a deposit address doesn't prove one. What I'd take from it is the size limit... if this is liquidation to fund remission, it's capped by the forfeiture estates that have victims attached, which is a much smaller pool than the government's whole stack. I think the market traded it as if it were the whole stack.
The liquidation was loud and small
$487.2M of leveraged longs went inside $555.6M of total crypto liquidations over 24 hours. Against open interest of $150.24B, the longs were 0.324% of the book and the full $555.6M was 0.370%. Open interest fell 2.45% in dollars while Bitcoin went from 85,523 on 6 October to the 83,577-83,800 area overnight, a fall of 2.0-2.3%, so most of that drop is just price and very few positions actually came out in coin terms. A real flush removes open interest. This one barely did, which likely means most of the positioning that was there on Tuesday is still there.
Where the coins are going
Bitcoin left exchanges on net seven days running through 6 October. That day alone was −14,211 BTC, the largest in the last 14 days, and the week to Tuesday came to −36,425 BTC (−$3.10B), the biggest weekly net outflow since the week to 25 August. Spot Bitcoin ETFs took in +$118.8M to +$119M on 6 October, with IBIT at +$122.0M, after −$89.8M the day before.
$ETH went the other way on both counts. Spot ETH ETFs lost $201.9M on 6 October, all of it from ETHA, the sixth straight outflow session and $407.8M since 29 September. Over the same six sessions the Bitcoin ETFs took +$239M, so the gap between the two wrappers is $646.8M. ETH also flowed onto exchanges on net for the week, +55,014 ETH (+$147M), even though 6 October itself was −11,346 out. The split between the two majors shows up in the ETF flows and the exchange balances both, and that makes it harder to explain away.
Levels and the calendar
Bitcoin's support on Bitstamp is 82,000-83,700, then 81,200-82,400, the low volume area from the recent advance, and the low end of the overnight slide reached into that first band. Resistance is 87,200-87,400, the last two weekly highs. For ETH, the weekly closed above 2,700 on 4 October at 2,726.79 and now has to hold it as support. The ~2,608 traded today is an intraday print, so it's the 11 October weekly close that grades it.
The minutes of the September FOMC meeting, the one that hiked 25bp to 3.75-4.00%, come out today at 14:00 ET. Going in, the 6 October FedWatch settle had an October hike at 19.9%, down from 37.6% on the 30 September settle, and no cut priced at any meeting through December 2027. I'll be watching whether the minutes push that October number lower or pull it back up.
Friday's CFTC report covers positions as of Tuesday 6 October. On 29 September leveraged funds were net short 35,720 BTC-equivalent, down from 40,111 the week before. If that narrows again, the covering kept going into the flush. If it widens, funds were adding shorts in the same days the longs got flushed, and that's the number I want to see.