Amid waves of concern surrounding Bitcoin sales by the US and German governments, industry experts have stepped forward to allay fears, suggesting these moves could be bullish for the market.
Yesterday, the Bitcoin sector experienced increased volatility following actions by two major governments. The German Federal Criminal Police Office (BKA) continued selling Bitcoin and reduced its holdings from 50,000 BTC to 45,264 BTC. At the same time, the US government transferred 4,000 BTC to Coinbase, likely for liquidation purposes, and retained a significant 213,546 BTC in its reserves.
Why This Is Bullish for Bitcoin (Long Term)
Travis Kling, founder of Ikigai Asset Management, noted the synchronicity of these events. “All at the same time: the US government sells the seized Silk Road Bitcoin, the US government sells the seized Banmeet Singh BTC, the German government sells the seized Movie2k BTC, and Mt Gox distributes BTC after ten years. Interesting…I can’t help but look at all these actions and wonder what kind of coordination/underlying intention there is,’ Kling declared via X.
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Despite concerns that these sales could put pressure on Bitcoin prices, experts say the impact on the market is likely to be minimal. Ki Young Ju, CEO of CryptoQuant, countered the prevailing fear, uncertainty and doubt (FUD). He noted: “The US government didn’t sell 4K Bitcoin today, but it’s less likely to impact the market. Coinbase Prime handled 20-49,000 BTC daily in sell-side liquidity during high spot ETF inflows and 6-15K daily during low spot ETF inflows. I’m posting this because I’m tired of the government ‘selling’ FUDs,” as shared via X.
Crypto analyst Skew (@52kskew) as long as insight into how these transactions typically occur: “The US government sent 3.94K BTC to Coinbase Prime to be handled by Coinbase Institutional. There are generally two options here: OTC desks can auction the BTC to customers (buyers outside the market), or an open market auction (which is sold on the market over time). Skew’s explanation makes it clear that the impact on price is likely to be quite small.
Adam Cochran, managing partner at CEHV, marked Bitcoin’s Resilience in the Face of Multiple Bearish Catalysts: “Also with the US government’s FUD, Mount Gox’s FUD, most major airdrops over, markets down, Nvidia at all-time highs, BTC has had every reason to to go lower, and it still largely controls $60,000. Negative news struggles to make a dent.”
Will Gold History Repeat Itself for BTC?
Echoing historically bullish sentiment, Alistar Milne, CIO of Altana Digital, drew parallels with previous government asset sales: “Government sales are bullish. Gordon Brown sold Britain’s gold reserves for less than $300/ounce. One of the worst decisions a finance minister has ever made. Germany and America are making much worse mistakes by selling now seized BTC. They can only sell once.”
Government sales are bullish
Gordon Brown sold Britain’s gold reserves for less than $300/ounce. One of the worst decisions a finance minister has ever made
Germany and America are making much worse mistakes by selling now seized BTC. They can only sell once pic.twitter.com/i0rZMpuiS0
— Alistair Milne (@alistairmilne) June 26, 2024
For context, during his tenure as Chancellor of the Exchequer from 1997 to 2007, Gordon Brown made the decision to sell off around 60% of Britain’s gold reserves between 1999 and 2002, a period known as the ‘brown bottom’.
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The sales took place through a series of auctions at prices ranging between $256 and $296 per ounce – significantly lower than gold prices in subsequent years, which saw significant increases. The move is widely regarded as a financial misstep that cost the British treasury billions in potential revenue as gold prices soared above $1,500 per ounce in the decades that followed.
Moreover, there is a bullish aspect to this. The completion of these BTC sales could remove significant overhang from the market as these sales hang over the market like a Damocles sword; Once this is done, major downside risk to the market is eliminated forever, better sooner than later.
At the time of writing, BTC was trading at $61,117.
Featured image created with DALL·E, chart from TradingView.com