Bitcoin investors concerned about weakness in the asset class may find that once one very large seller is out of the way, the cryptocurrency’s price quickly resumes its uptrend. The German government, which owns around $2 billion in Bitcoin (BTC), is the seller generating this market’s fear.
Its recent sales have significantly impacted the cryptocurrency market, which caused additional selling from those reacting to the trend, magnifying the move. This may all pass quickly for Bitcoin holders, as the Euroblock nation owns cryptocurrency and is working out of the position. This means that the disrupted crypto market could be temporary.
German Government’s Bitcoin Sell-Off
Germany is in the custody of the position as its Federal Criminal Police Office (BKA) seized 49,857 BTC from the operators of a now-defunct film piracy website called Movie2k.to. As of July 8, 2024, the German government still holds approximately 39,826 BTC, valued at $2.2 billion U.S. dollars, representing nearly 9% of Bitcoin’s daily trading volume. Since mid-June, Germany has liquidated over 10,000 BTC, contributing to an almost 20% decline in Bitcoin’s spot price to $55,490. The sales have been conducted through Coinbase (NASDAQ:COIN), Bitstamp, and Kraken exchanges.
Market Reaction and Concerns
The market reaction to these sales has been significant. Bitcoin’s price has dropped by nearly 13% in the past seven days alone, and the broader market gauge, the CoinDesk 20 Index, has seen a 14% decline to 1,870 points in one week. The entire crypto market shed more than $170 billion in combined market capitalization within 24 hours. This has led to concerns about further price turbulence, especially given the substantial holdings that Germany still possesses.
Adding to the market pressure, the potential sales by creditors of the failed Mt. Gox exchange have also been a concern. The long-awaited return of the approximately $8 billion worth of bitcoin to creditors will be another potential influx of supply that has been unavailable to the market. If liquidated, this could further contribute to recent downward pressure on bitcoin’s price.
Not All Agree With the German Decision
Critics argue that Germany’s decision to sell its bitcoin holdings for fiat currency (a national currency not derived from assets such as gold or silver) is a strategic error. The Blockware Intelligence newsletter described the move as a geopolitical blunder, emphasizing that Bitcoin’s limited supply and the significant physical energy required to mine it make it a more valuable asset than fiat currency, which can be printed at will. Joana Cotar, a member of the German Bundestag, has also criticized the sales, suggesting that the government should hold Bitcoin as a “strategic reserve currency” instead.
Bitcoin Investor Optimism
Despite these challenges, some investors remain optimistic about Bitcoin’s long-term prospects. The options market shows a high concentration of bullish speculation around a strike price of $100,000, reflecting expectations of more accessible Federal Reserve monetary policy and the growing popularity of pro-crypto political officials. However, the immediate market sentiment remains cautious, with traders concerned about the ongoing selling pressure from Germany’s bitcoin holdings and the broader market dynamics.
Key Takeaway
While the German government’s sell-off of Bitcoin has raised concerns among investors, the impact on the market may not be as significant as initially feared. The market has shown resilience in the face of large-scale sell-offs in the past, and the current situation is similar. As the German government works through its position, Bitcoin investors may find that the market stabilizes and returns to its previous trajectory.
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