CoinWorld reported:
After Germany suddenly sold a large amount of Bitcoin reserves, both the German and US governments transferred hundreds of millions of dollars worth of Bitcoin from private wallets to exchanges, sparking speculation of a large-scale sale. In particular, the US, through the confiscation of criminal assets, has obtained so many Bitcoins that, by the standards of ten years ago, these insignificant amounts have developed into a treasure worth hundreds of millions of dollars. Even more pressing is the fact that the federal government is slow to auction these assets while continuing to make new seizures, making it one of the largest whales in the entire industry. These government-held Bitcoins are a true unknown factor; they may be deliberately manipulated by specific participants in government power, or they may be sold without consideration for the potential market impact.
According to blockchain data, the German Federal Criminal Police Office (BKA) transferred about $75 million worth of Bitcoin through multiple transactions on July 4th. These funds were dispersed across exchanges such as Coinbase, Kraken, and Bitstamp. Prior to this, since mid-June, the government had transferred about $315 million worth of Bitcoin to various platforms. In less than a month, Germany has sold over $390 million worth of Bitcoin.
In early 2021, the German police confiscated 50,000 Bitcoins, valued at $2.17 billion at the time. The case was related to the operation of a piracy website that violated copyright laws in 2013, and the proceeds of the company were subsequently converted into Bitcoin. The statement stated that one of the two suspects voluntarily transferred the Bitcoin to the Federal Criminal Police Office (BKA), and although no formal charges have been filed against these individuals, the investigation into subsequent money laundering activities is still ongoing. At the time, the police statement added that a final decision had not been made regarding the use of Bitcoin.
These Bitcoins were finally transferred and sold starting in June this year, with a total of about 9,600 Bitcoins sold and the current position holding 40,359 BTC.
In 2013, the BKA confiscated nearly 50,000 Bitcoins related to the former operator of the movie piracy website Movie2K. These Bitcoins are estimated to be worth $2.3 billion at today’s prices.
The stable influx of Bitcoin into exchanges indicates that Germany may be planning to liquidate part of its reserves. This has raised concerns about the impact on the Bitcoin market price, which fell below $54,000 this week.
However, the amount transferred so far only accounts for a small portion of Germany’s massive Bitcoin reserves. After the recent transfers, Germany still holds about 40,000 Bitcoins.
The German government “believes that the price of Bitcoin will remain weak in the near future.” In other words, not every jurisdiction has to operate according to the same agreements as the United States in the past. The Bitcoins being sold this time were obtained by Germany after an investigation in 2020, but the actual arrest did not result in all the related Bitcoins being seized. In fact, local officials claim that the seizure in this case is still ongoing, with over $3 billion seized in January this year. Obviously, unlike some assets of the US government ten years ago, these Bitcoins are just lying idle in their pockets.
This sale is similar to recent transfers by the US government. The US also holds Bitcoins confiscated in criminal cases, raising concerns that the US may be selling its reserves.
Furthermore, this liquidation comes at a time when the repayment of creditors after the bankruptcy of Mt. Gox in 2014 is set to begin in July. This timing may further exacerbate the selling pressure on Bitcoin.
German MP urges government to stop hasty Bitcoin sales
German MP Joanna Cotar stated that large-scale Bitcoin sales are not “wise” and “ineffective” as it can be used to diversify national assets and prevent currency devaluation.
The Bitcoin-supporting politician wrote a letter to German government members on July 4th, urging them not to hastily dispose of state-owned Bitcoins.
Cotar stated that Bitcoin can help Germany achieve asset diversification, hedge against inflation and currency devaluation, and promote innovation in the country.
Cotar argued that further Bitcoin sales are “unwise” and “counterproductive” for Germany. She also used the letter to invite four German political figures to attend the “National Bitcoin Strategy” event in October, in order to provide inspiration to her colleagues.
Justin Sun proposes a buyback
Tron founder Justin Sun proposed to buy the Bitcoins held by the German government, worth over $2.3 billion.
On July 4th, Sun announced this proposal to his 3.5 million followers on X:
“I am willing to negotiate with the German government to purchase all BTC off-exchange in order to minimize the impact on the market.”
The German government-marked wallet first sparked suspicions of Bitcoin sales on June 19th when it transferred 6,500 Bitcoins (worth over $425 million).
What turned this incident from a minor episode into a source of panic was the US government’s decision to take similar actions. On June 27th, over $240 million worth of Bitcoins were transferred from private wallets to the Coinbase platform, especially wallets related to institutional traders. Furthermore, blockchain tracking shows that these Bitcoins were confiscated from drug dealer Banmeet Singh in 2024. Some of the federal government’s Bitcoins have been stuck in bureaucratic deadlock for over five years, yet these Bitcoins could be auctioned off in less than six months.
Of course, the actual auction date of these assets in Coinbase wallets is not guaranteed. However, this move still instills fear in the Bitcoin community when prices have already plummeted. Is the US government, the giant holding over $13 billion worth of Bitcoin, finally deciding to manipulate the market consciously? Or, more accurately, are they firmly shorting Bitcoin? The officials in Germany who suddenly sold Bitcoin are obviously trying to make some quick money before Bitcoin enters a long bear market. Such sentiments can have particularly harmful effects on the collective behavior and attitudes of traders, and when such decisions are made by industry whales, this influence is doubled. If the US government quickly sells the $240 million worth of Bitcoin it acquired a few months ago, who knows if it will continue this behavior and sell billions of dollars more? Such selling pressure could trigger a real bear market.
This lawsuit reminds us that many exchanges that may handle quick auctions of billions of dollars worth of Bitcoin are currently engaged in legal battles with the federal government! Coinbase is currently involved in other legal disputes; Germany’s alternative exchange, Kraken, became a target at the end of last year; and Binance has been involved in a devastating lawsuit that led to the imprisonment of its CEO. These are just a few of the cryptocurrency-related companies and exchanges that have faced various lawsuits in recent months. However, such companies are unlikely to completely prevent the government from conducting auctions, but the entire business may become more difficult. If a faction within the relevant institutions seeks faster profits from the auction system, they may not proceed smoothly.
Ultimately, we have no way of knowing the intentions behind the US government’s transfer of these funds. Many questions remain unanswered and may continue to be mysteries in the foreseeable future. However, Bitcoin holders can rest assured that extremely pessimistic scenarios are unlikely to occur. The US government holds billions of dollars more in Bitcoin than Germany and cannot convert these Bitcoins into cash without attracting attention. We only need to see what actions these and other confiscated Bitcoin reserves will take in the near future. But before that, any doomsday predictions are purely speculative.
Selling Pressure on Bitcoin
Grayscale Research pointed out that the decline of Bitcoin in June was due to the combination of selling pressure from multiple parties. These pressures not only affected Bitcoin but also spread to other cryptocurrencies. The major sources of selling pressure include:
Mt. Gox bankruptcy estate: The trustee of Mt. Gox announced that the repayment of Bitcoin and Bitcoin Cash will begin in early July, which increased concerns in the market about future sales.
German government liquidation: The German government began liquidating the Bitcoins confiscated in 2013, sending nearly 4,000 Bitcoins worth about $220 million to exchanges in June.
US government sales: On June 26th, the US government transferred 3,940 Bitcoins ($240 million) to Coinbase Prime, further increasing market pressure.
Bitcoin miner selling: Miners sold approximately 1,560 Bitcoins worth about $100 million in the past 30 days.
US spot Bitcoin ETP outflows: In the second half of June, these products saw net outflows of $581 million.
The biggest market pressure comes from institutional venture capital’s cashing out behavior in altcoins, which is ongoing.
The cryptocurrency market has been bloodbathed in recent days, especially altcoins. Bitcoin has fallen to the $50,000 range, a drop of about 30%. However, altcoins have fallen by about 80%, and many of them have fallen to the prices of the most bearish market at the end of 2022 when Bitcoin was around $16,000.
