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US and German Governments Move Bitcoin, Sparking Fears of Major Sell-OffGermany and the US are selling Bitcoin reserves and moving funds to exchanges, sparking fears of a major sell-off and causing price anxiety in the market.
In the aftermath of Germany’s abrupt sale of substantial Bitcoin reserves, both it and the American government have moved hundreds of millions in Bitcoin from private wallets onto exchanges, sparking speculation of an impending sale. Amidst all the speculation about Bitcoin’s performance in the latter half of June, it can be easy to forget that the cryptoasset’s actual value is a stone’s throw away from its highest valuation of all time. And that time span is very long. It has long been established that certain world governments, particularly the United States, acquired so much Bitcoin in criminal asset seizures that modest sums by the standards of ten years ago have blossomed into treasure troves worth hundreds of millions. Even more pressingly, the federal government has been particularly slow with auctioning off these assets while continuing to make new seizures, allowing it to become one of the biggest whales in the whole industry. This situation has been a known factor in the Bitcoin community and has encouraged no small amount of speculation as to the impact that future government sales could have on the price. After all, any relation to the market or profit earning is largely irrelevant to the pace of these auctions, which is instead set by the same bureaucratic structures that would govern any piece of confiscated property. In short, these government hoards are a true wild card that could either be played deliberately by specific actors within the halls of power or sold off without consideration as to the potential downstream market impacts. Although the US federal government is the biggest state holder, claiming jurisdiction over such Bitcoin-heavy enterprises as the Silk Road and at one point holding more than 1% of all circulating Bitcoin, it was actually a different auction process that apparently set off a chain reaction. Specifically, it was the state of Germany, which alarmed the entire community with $325 million in sales that had almost zero prior announcement. These major transactions were completed over the course of 2 days, and the resultant selling pressure on Bitcoin caused the price to drop by 3.5%. Bitcoin’s price was already wobbling before this event, and these sales certainly did not encourage further bullish sentiments among traders. Robert Quartly-Janeiro, Bitrue’s Chief Strategy Officer, even went so far as to claim that this decision was a deliberate strategy rather than a scheduled release. “Having seen a slippage in the price of BTC, the German government is releasing significant tranches of BTC," said Quartly-Janeiro, adding that the state “has taken a view that the price of BTC is to soften for a while to come." In other words, not every jurisdiction is necessarily set to operate by the same protocol that the US has in the past. The bitcoin from this sale was acquired by Germany as the result of an investigation in 2020, but the actual arrests did not coincide with the seizure of all relevant bitcoin. In fact, local officials claim that seizures from this one case are ongoing, with over $3 billion seized this January. Apparently, unlike some of the US government’s decade-old assets, these coins were simply burning a hole in their pockets. This brings us to more recent developments. As it turns out, there are clear signals that the Germans aren’t done. On June 25th, the government moved further quantities of Bitcoin from privately held wallets onto prominent exchanges. $24 million worth of the asset were moved onto Coinbase and Kraken’s platforms, while a further $30 million was moved to an unidentified wallet. To be clear, the data shows that Germany still controls the vast majority of its overall seized Bitcoin reserves. Nonetheless, it moved over $425 million in less than one week, and that has kept the markets spooked.
What truly transformed this occurrence from a minor footnote to a source of panic has been the US government’s decision to take similar steps. On June 27th, Bitcoin summing over $240 million was transferred from private wallets onto Coinbase’s platform, specifically those related to institutional traders. What’s more, blockchain tracking has revealed that this Bitcoin in particular was seized in 2024 from drug trafficker Banmeet Singh. Some of the coins in the federal government’s stockpile have been in bureaucratic limbo for more than five years, yet these coins have potentially gone onto the chopping block in under six months. Of course, the presence of these assets on a Coinbase wallet does not guarantee that the actual auction date is impending. Yet, the move has still struck fear into the Bitcoin community at a time when the price was already slumping. Is the US government, a whale that holds more than $13 billion in Bitcoin, finally taking steps to play the market consciously? Or, to be more accurate, are they playing the market with a firm bet against Bitcoin? The officials behind Germany’s sudden sale were apparently motivated by a drive to make some quick cash before Bitcoin went into a prolonged bear market. Sentiments like that can have a particularly toxic impact on traders’ collective behavior and attitudes, and that goes triple when these decisions are made by big industry players. If the US government quickly flipped $240 million in Bitcoin that it only acquired months ago, who knows if it would continue this behavior with billions more? Selling pressures like that could trigger a real bear market. It can be particularly difficult to discern distinct motivations and actors from such opaque bureaucratic institutions as the agencies that actually make these decisions. For this reason, it might be more effective to look at some practical limitations for why this fire sale scenario won’t materialize. For one thing, although Germany moved its coins into several different wallets, the US dumped them all onto Coinbase. And, as of June 27th, that same exchange is currently suing both the SEC and the FDIC. Accusing these regulators of deliberate attempts to stifle the crypto industry, Coinbase cites a number of incidents that it claims are evidence of the government’s mistrust. The most credible portion of their argument appears to be a series of Freedom of Information Act (FoIA) requests from Coinbase, which the agencies denied or delayed with no explanation. This lawsuit can remind us that many of the exchanges that could possibly handle the rapid auction of billions in Bitcoin are currently engaged in legal battles with the federal government! Coinbase is currently tied in other legal battles; Germany’s backup Kraken was targeted late last year; and Binance was involved in a devastating suit that saw its CEO incarcerated. And these are just a few of the myriad crypto-related businesses, exchanges, and others that have faced various lawsuits in the past few months. It’s unlikely that a business like this could entirely prevent the government from conducting its auctions regardless, but it remains that the whole business could become significantly more difficult. If there is a faction within the relevant agencies that seeks a quicker profit than the auction systems, it’s unlikely that they’ll have a smooth experience. Ultimately, we simply have no way of knowing what the US’ intentions are with these transfers. A lot of questions remain unanswered and are likely to remain open mysteries for the foreseeable future. Still, Bitcoiners can take heart in the knowledge that a doomsday scenario is very unlikely to materialize. The American government holds many billions more in Bitcoin than the German, and there is no way to turn this stash into cash without anyone noticing. We’ll just have to see what actions happen in the near future with these and other confiscated Bitcoin stashes, but until then, any doomsaying is complete speculation. If you liked this content please give a like and share! Comment below with your reactions to this post and any recommendations for future topics. Thank you for reading Bitcoin Magazine Pro, we sincerely appreciate your support! Not Financial Advice.
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Saturday, June 29, 2024
US and German Governments Move Bitcoin, Sparking Fears of Major Sell-Off
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