Bitcoin's near-term price trajectory depends heavily on U.S. political developments, according to cryptocurrency industry veteran Arthur Hayes.

The BitMEX founder stated on X that investors should "chill out, retrace and wait" for now.

"If Trump can't pass his budget which spends more and hikes debt ceiling, resume capitulation to levels pre the election day victory: $75,000 to $70,000," Hayes wrote. "This is test of how strong Trump's hold is on the Republican party."

Hayes warned that many hedge funds that purchased BlackRock's iShares spot Bitcoin exchange-traded fund could exit their positions if Bitcoin continues its downward trend. These institutional investors adopted a specific yield-generating strategy.

"Bitcoin goblin town incoming: Lots of IBIT holders are hedge funds that went long ETF short CME future to earn a yield greater than where they fund, short-term US treasuries," he explained.

The cryptocurrency strategist elaborated on the market mechanics at play. "If that basis drops as BTC falls, then these funds will sell IBIT and buy back CME futures."

"These funds are in profit, and given basis is close to UST yields they will unwind during US hours and realize their profit. $70,000 I see you mofo!" Hayes added.

Bitcoin traded at $84,498 at time of writing, representing a decline of more than 4% over the previous 24 hours. The cryptocurrency remains the highest-ranked digital asset by total market capitalization despite recent volatility.

Disclaimer: The information provided in this article is for educational purposes only and should not be considered financial or legal advice. Always conduct your own research or consult a professional when dealing with cryptocurrency assets.