July 15, 2024

Germany’s Bitcoin Sell-Off Fuels Market Turmoil

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For weeks, Germany’s government has been offloading hundreds of millions of dollars’ worth of bitcoin, contributing significantly to the cryptocurrency’s recent intense sell-off.

Last month, the German Federal Criminal Police Office, known as the Bundeskriminalamt (BKA), initiated the sale of bitcoin from a wallet under its control. This bitcoin was part of a massive haul seized from a now-defunct movie piracy website. According to on-chain data from blockchain analysis firm Arkham Intelligence, the BKA sold 900 bitcoins in June, amounting to approximately $52 million.

The sales didn’t stop there. Last week, the government sold an additional 3,000 bitcoins worth roughly $172 million. On Monday, another 2,739 bitcoins were sold, equating to $155 million. The German government has been transferring its crypto reserves to exchanges like Coinbase, Bitstamp, and Kraken, resulting in a dramatic impact on the cryptocurrency market.

Bitcoin’s price has plummeted in tandem with these sales, dropping below $55,000 on Friday — its lowest level since February 2024, according to CoinGecko data. At one point, the entire crypto market shed more than $170 billion in combined market capitalization within a 24-hour period.

Germany’s bitcoin sales aren’t the only factor causing concern among crypto investors. The payout of billions of dollars’ worth of digital currency from the collapsed bitcoin exchange Mt. Gox to its creditors has also added pressure. Nobuaki Kobayashi, the trustee for the Mt. Gox bankruptcy estate, announced on Friday that repayments in bitcoin and bitcoin cash had begun through various designated crypto exchanges.

Despite the substantial figures involved, it’s important to note that these sales represent only a small fraction of bitcoin’s overall token issuance. There are approximately 19.7 million bitcoins in circulation today, valued at $1.1 trillion according to CoinGecko.

However, for investors, the primary concern is how these large-scale sales are influencing market sentiment. In January 2024, police in the eastern German state of Saxony announced the seizure of nearly 50,000 bitcoins, worth around $2.2 billion at the time. This was labeled as “the most extensive seizure of bitcoins by law enforcement authorities in the Federal Republic of Germany to date.”

The bitcoins were seized from the operators of Movie2k.to, a movie piracy site active in 2013, and were transferred to a crypto wallet managed by the BKA. Arkham Intelligence reports that these tokens began moving as far back as 2013 when they were originally seized. As of today, the BKA holds roughly 32,488 bitcoins, valued at approximately $1.9 billion.

Germany’s decision to sell its bitcoin holdings has not been well-received by everyone. Critics argue that the sell-off has exacerbated market volatility and undermined investor confidence in an already tumultuous period for digital assets. As the market continues to grapple with these developments, the long-term implications for both the cryptocurrency sector and broader financial markets remain to be seen.

Digital Assets Desk

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