Markets
Germany’s sale of 0.25% of global Bitcoin adds to jitters in cryptocurrency market
The German government is flooding the cryptocurrency market with Bitcoin. As of Wednesday, he had transferred at least $615 million worth of Bitcoin to various cryptocurrency exchanges and market entities, according to data by Arkham Intelligence.
The government sold nearly 50,000 Bitcoin seized in mid-January, worth about $2.1 billion at the time, by police in the eastern German state of Saxony. The seizure was the result of a “voluntary transfer” by the suspects, who were accused of operating Movie2k.to, a movie piracy website that was active in 2013.
In jail data shows Bitcoin moving in and out of the German Government (BKA) wallet from late January onwards. There are still 13,111 Bitcoins in the wallet, worth around $759 million at the time of publication. This means that around 75% of the seized assets have been sold so far.
The prospect of $2.1 billion worth of Bitcoin entering the market may have spooked some investors, as Germany’s selloff coincided with recent price corrections. Bitcoin’s most recent decline began on June 6, according to data from CoinGecko, aligning with when BKA outflows began to accelerate. Bitcoin has fallen about 19% since then and is now trading around $57,000.
Indeed, there are “market fears” about Germany selling its Bitcoin stash, OKEx’s chief commercial officer Lennix Lai admits. Increasing selling pressure has been Mount Gox last week, starting $9 billion worth of Bitcoin payments to creditors, the US government selling coins seized from Silk Road and Banmeet Singh.
“All of this is not only applying legitimate selling pressure to the market, but also telegraphing the selling to the market — giving market participants the opportunity to sell in anticipation of these events occurring,” Zach Bruch, founder and CEO of crypto casino MyPrize, told Fortune. In other words, the anticipation of the selloffs only intensified their impact.
The bigger picture
But taking a step back, 50,000 Bitcoin represents just 0.25% of the total supply of the approximately 19,700,000 that have been mined so far. “While such liquidations may result in short-term volatility, the Bitcoin market tends to have adequate liquidity to absorb them and recover quickly. These liquidations are unlikely to trigger a massive drop in the price of Bitcoin,” Lai told Fortune.
The story continues
Fortunately, despite Bitcoin’s decline in recent weeks, spot ETFs have seen fresh capital flowing in after weeks of outflows. Investors in these funds may be slowing the price slide. Since June 25, the funds have seen net inflows of $886.8 million, according to CoinGlass. data.
Despite central banks holding large reserves of foreign currencies — the US holds at least 35 billion dollars in euros and yen—the German government has opted for a mass liquidation policy. This decision has drawn criticism from the crypto community, not only because of the impact on supply and demand, but also because of the logic, assuming that the government is selling Bitcoin in exchange for euros. While the value of Bitcoin has increased by over 20,754% since 2015, the purchasing power of the euro refused by 39% between 2000 and 2020. “Make it make sense,” said one X user he wrote.
This story was originally featured in Fortune.com