U.S. Government Transfers Trigger Panic — Crypto Market Sees Broad Sell-Off Again

TradingKey – Test transfers from U.S. government crypto wallets spark fears of liquidation, leading to widespread declines across digital assets.

On Thursday, October 16, the crypto market plunged back into panic mode. The Crypto Fear Index dropped to 32, matching levels seen during the “10/11 crash.” Simultaneously, recent rebounds stalled and reversed:

• Bitcoin (BTC) fell nearly 1%
• Ethereum (ETH) dropped over 2%
• Binance Coin (BNB) declined more than 1%

Top 10 Cryptocurrencies by Market Cap – Source: CoinMarketCap

The renewed downturn was largely driven by U.S. government wallet activity. According to Arkham Intelligence, officials transferred $381.44 in TRX and $393 in TUSD earlier today — interpreted as test transactions ahead of larger moves. These assets are part of the $575 million seized three years ago in the Potapenko/Turogin case, involving Estonian nationals. Just days ago, the government moved 667.67 BTC, worth over $70 million.

Adding to market anxiety, the U.S. and U.K. recently sanctioned Chen Zhi, chairman of Cambodia’s Prince Group, over alleged cybercrime and labor violations. Authorities seized 127,271 BTC, valued at approximately $15 billion, marking one of the largest crypto forfeitures in history.

While fears of a government-led sell-off persist, sources familiar with the U.S. Bitcoin Strategic Reserve Plan suggest that these assets are likely to be converted into sovereign reserves, rather than liquidated on the open market.