Recently, the price of Bitcoin has suffered another heavy blow, causing widespread concern in the market. Of particular concern is the large amount of Bitcoin held by major governments and early miners around the world flowing into exchanges, triggering panic selling in the market. At the same time, the liquidation plan of Mt.Gox, known as the “Bitcoin burden,” is also making progress, further exacerbating market concerns and resulting in unprecedented selling pressure in the entire cryptocurrency market.
US government transferring Bitcoin
On June 27th, according to data from the blockchain analysis company Chainalysis, the US government recently transferred approximately 4000 bitcoins (worth about $240 million) to the Coinbase exchange. This massive transfer of Bitcoin immediately caused a significant fluctuation in the cryptocurrency market, with the price of Bitcoin dropping by 6% in a short period of time.
Analysts pointed out that these Bitcoins may come from illegal assets seized by the US government. The government’s choice to transfer and sell these Bitcoins through Coinbase may indicate its plan to continue large-scale sales of cryptocurrencies in the future. Although these Bitcoins will not cause dramatic fluctuations in the market, the specific quantity of Bitcoin that the US government will sell this time is still unclear (there are still 213,000 Bitcoins in the current wallet, making it the third-largest Bitcoin whale in the world). In the current market downturn, any movement has the potential to have an impact, and it is worth investors’ continued observation.
The US government’s Bitcoin sales operation has been interpreted by the market as possibly triggering a second round of Bitcoin price declines. It is well known that when government agencies sell large amounts of cryptocurrencies, they usually have a significant suppressing effect on the market, leading to a substantial price drop. Analysts pointed out that if the US government continues to transfer more confiscated Bitcoins to exchanges, the future decline in Bitcoin prices may continue.
Increased selling pressure from the German government
The “government sell-off” has become one of the important factors contributing to the downward pressure on Bitcoin prices. Recently, the German government once again sold Bitcoin, transferring 650 BTC (about $40.29 million) to the Coinbase, Bitstamp, and Kraken exchanges. It is reported that this is the second recent sale of Bitcoin by the German government (related reading: National sell-off pressure! German government sells 50,000 Bitcoins! Whales profit $1.2 billion in two weeks! What will be the market’s follow-up trend?). Currently, the German Federal Criminal Police Office (BKA) still holds 45,264 Bitcoins, valued at approximately $2.76 billion.
According to data, in the past month, the German government has transferred approximately $150 million worth of Bitcoin to the Bitstamp and Kraken exchanges, directly affecting the price trend of Bitcoin. These transactions have caused the German government’s ranking in the global government-held Bitcoin to fall from second to fifth place.
Analysts pointed out that the main reasons behind the German government’s actions are twofold: first, to fill the budget gap of the national finance by cashing out the Bitcoin held; second, considering the overall sluggish trend in the cryptocurrency market, the German government hopes to cash out as soon as possible when prices are high, in order to avoid further risks of decline.
However, the continuous selling behavior of the German government will undoubtedly exacerbate the selling pressure on Bitcoin and become a significant factor in suppressing the upward movement of Bitcoin prices in the short term. Especially in the current situation of macroeconomic instability, this selling behavior may trigger a chain reaction and bring a heavy blow to the entire cryptocurrency market.
Mt.Gox creditor repayment plan
On the other hand, the Mt.Gox liquidation case, known as the “Bitcoin burden,” has also attracted attention. Mt.Gox was once the world’s largest Bitcoin exchange and experienced the largest Bitcoin theft in history in 2014, resulting in the loss of 940,000 Bitcoins and heavy losses. Only recently has there been new progress on the creditor repayment plan for the Mt.Gox bankruptcy case.
As a result, the cryptocurrency market has experienced a “dive,” with Bitcoin temporarily falling below the $60,000 mark. However, things seem to have turned around. The final compensation will be based on the value of Bitcoin in 2014, at $483 per Bitcoin, rather than the current value or the quantity of lost Bitcoins, so the impact of this liquidation plan on the entire market may not be as significant as previously expected.
Specifically, Mt.Gox has recovered 15% of its losses, totaling 141,868 Bitcoins. However, due to the increase in the price of Bitcoin (from $451 at the time of bankruptcy to $63,500 on 5/13), the creditors’ profits have increased by 140 times when calculated in US dollars.
If creditors choose to receive an early payment, they will only receive 90% of the Bitcoin (10% haircut). Galaxy expects that about 75% of the creditors will choose this option, meaning that about 95,000 Bitcoins will be paid in advance to the creditors. Among them, 20,000 Bitcoins belong to the claims fund, 10,000 belong to BitcoinicaBK, and the remaining 65,000 belong to independent creditors.
Independent creditors holding about 65,000 Bitcoins are expected to have only 10% choose to sell immediately, meaning that only 6,500 Bitcoins will create selling pressure. Because these independent creditors are early Bitcoin adopters who are knowledgeable about the technology, they are more likely to hold Bitcoin for the long term and are not in a hurry to sell.
In addition, it is worth noting that recently, “Satoshi-era miners” who have been dormant for 14 years have liquidated and profited more than 1 million times, reflecting the possibility that Bitcoins long held by early miners may be gradually entering the market.
This large-scale selling behavior by miners may mean that the selling pressure from the “dormant” wallets that previously supported the price of Bitcoin has reached a critical point. If more such liquidation events occur in the future, it is bound to further intensify the downward pressure on the entire market. However, the selling pressure is not expected to be too great, as most early miners are likely to choose to hold for the long term rather than sell in large quantities.
Overall, the current market situation is turbulent, but it may only be a temporary adjustment, and there is still hope for a return to an upward trend in the future. Investors may maintain a cautious and optimistic attitude, closely monitor changes and trends in the market, and manage investment risks effectively.
