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(Kitco News) - Amid the growing optimism for Bitcoin (BTC) and the broader cryptocurrency ecosystem brought by renewed institutional interest in the asset class, Jurrien Timmer, Director of Global Macro at Fidelity, has warned that the top crypto has gotten ahead of itself and may see a pullback in the near term.
“Bitcoin (that aspirational digital store of value) seems to be shrugging off the rise in real rates, anticipating the possibility of a spot ETF,” Timmer tweeted on Tuesday.
He included the following chart, saying, “This chart suggests that Bitcoin is slightly ahead of itself, based on its adoption curve and the macro real-rate environment.”
Bitcoin Drivers. Source: Twitter
A follow-up note from Timmer focused on the adoption curve for Bitcoin, which represents the rate at which new participants enter the market.
“Using the internet-adoption curve as a possible roadmap for Bitcoin’s future network growth and applying a range of real rates (from +2% to -2%), we see that Bitcoin has reached the +2% side of the band (which is where real rates are now),” he said. “Unless real rates start to decline again (or the adoption curve accelerates), it suggests limited upside for now.”
BTC Price vs. Bitcoin adoption curve. Source: Twitter
He also noted that Bitcoin’s adoption curve has fallen short of the adoption curve for mobile phones, “and is now tracking the internet curve more closely.”
“Real rates have become a driver as well, which makes sense if BTC is aspirational money,” he added.
While Timmer sees overbought conditions as a sign that BTC may soon trend lower, another possible source of weakness emerged on Wednesday after the U.S. government – for the second time – transferred some of the Bitcoin seized from the Silk Road darknet marketplace in preparation for sale on the open market.
According to on-chain data, two wallets identified as belonging to the U.S. Department of Justice (DOJ) and linked to the Silk Road crypto seizure moved nearly $300 million worth of Bitcoin (BTC) in three separate transactions on Wednesday morning.
The bulk of the transfer was in the second transaction made by the DOJ, with 8999.908 BTC worth $274,785,010 sent to one address, while a second address received a transfer of 0.1 BTC worth $3,053.
The DoJ first began selling its Silk Road stash of 51,352 BTC in March, with government officials selling 9,861 BTC for more than $215 million, leaving roughly 41,491 BTC in the government’s possession.
"The Government understands [the seized Bitcoin] is expected to be liquidated in four more batches over the course of this calendar year,” the DOJ said in a court filing at the time of the first sale.
The DOJ said at the time that the second round of liquidation would not occur until the sentencing date for James Zhon, a Georgia man who pleaded guilty in November to stealing the BTC stash in question from Silk Road and forfeited the tokens to the DoJ as part of his plea deal.
On April 14, Zhon was sentenced to one year and one day in prison for a charge of wire fraud, which cleared the way for the DOJ to progress to the second round of selling.
While many crypto proponents are concerned that the sale of 9,000 BTC by the DOJ could negatively affect the market, price action around the time of the first sale on March 14 shows that BTCs price actually increased in the days that followed.
BTC/USD Chart by TradingView
This sale also coincided with the collapse of several banks in the U.S. and Europe, which potentially helped support the price of BTC at the time as investors sought out assets that could protect their wealth in the event of a widespread banking crisis.
A deeper dive by crypto sleuths showed that the 9,000 BTC were divided into 101 different wallets, with Coinbase set to sell the tokens in tranches of 79 BTC worth $2.37 million each.
Thus far Bitcoin appears to be showing resilience in the face of the FUD generated by this announcement and the start of sales, leading many to predict that BTC will soon break out higher after facing multiple days of price compression around support at $30,500.
The market's reaction to Silk Road BTC FUD has been incredibly strong! Combined with a positive CPI response and Bitcoin staying above 30k, I'm getting a strong feeling that we're on the verge of a breakout from this range. Exciting times ahead! ?? #Bitcoin pic.twitter.com/BGtHXSXKcw
— LSD CRYPTO (@Mr_LSD_Crypto) July 12, 2023
