The German state of Saxony has been actively selling off its Bitcoin reserves that were confiscated from Movie2K, a film piracy website earlier this year. This has been a major move by the government, with over $3 billion worth of BTC being auctioned off. The latest development came on Thursday when Bitcoin wallets connected to German authorities transferred a significant amount of 10,567 BTC (approximately $600 million) to various entities such as Bitstamp, Coinbase, Kraken, Flow Traders, and Cumberland DRW. These transactions were carried out in multiple batches throughout the day, depleting the wallets to hold only 6,894 BTC ($394 million) currently, down from almost 50,000 BTC when the selling process began three weeks ago.
At the current pace, it is projected that Germany could conclude the sell-off by Friday or early next week, as they have managed to offload around 35,000 BTC just this week alone. However, it is important to note that the total count of Bitcoin held by the German government may vary, as seen yesterday when the wallets contained just under 5,000 BTC. This fluctuation in numbers is due to the unique practice of wallets receiving portions of the transferred assets back from exchanges and brokers, sometimes in substantial amounts like $10 million, before the end of the day. This on-chain activity, as described by Greg Cipolaro, head of research at digital asset manager NYDIG, has been referred to as “perplexing”.
The sell-off of Bitcoin by the German government has not gone unnoticed, as it has raised concerns among crypto investors about the potential impact on the market. Many have attributed the recent decline in asset prices to fears of oversupply resulting from such large-scale selling activities. Joana Cotar, a German lawmaker and Bitcoin activist, has criticized the government for not considering Bitcoin as a strategic reserve currency to safeguard against risks within the traditional financial system. This sentiment has been echoed in other countries as well, with the U.S. government having more than $12 billion in seized Bitcoin and moving $240 million worth of BTC related to Silk Road to Coinbase. In addition, the defunct Japanese exchange Mt. Gox has also distributed its Bitcoin to creditors. These actions have led to heightened concerns among investors, especially considering the decline in BTC value during these sell-offs.
Market Response
Despite the fears surrounding the looming sell pressure on Bitcoin, NYDIG’s Cipolaro believes that these concerns may have been exaggerated. He noted that the decline in BTC value has surpassed the expected price impact if all potential selling activities were realized. Currently, Bitcoin is trading at $57,281, reflecting a 6% decrease over the last week and a 15% drop over the past month. The consecutive bearish events in the market have caused the Crypto Fear & Greed Index, which tracks market sentiment, to enter the “Extreme Fear” zone for the first time since January of last year.
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