Governments keep on selling Bitcoin, but why?

Bitcoin sell-offs and transfers from governments like the US and Germany continue, despite its negative effects to the broader crypto market.

Key Takeaways

Germany and the US have sold significant amounts of Bitcoin recently, despite market fluctuations. The Bitcoin sold originates from criminal seizures, with Germany still holding over 26,000 BTC. <?xml encoding="UTF-8"?>

Over the past couple of weeks or so, the German and US governments have been selling their Bitcoin stash, continuing to do so despite the market going on a rather rough downturn and significant fluctuations. But why?

Just earlier today, the German government has transferred an additional $28 million worth of Bitcoin to crypto exchanges, continuing its liquidation of seized digital assets.

According to blockchain data tracked by Arkham Intelligence, addresses linked to the German government by analytics firm Arkham transferred 250 BTC each to Coinbase and Bitstamp. An additional 500 BTC, was sent to an unidentified address. These transactions are part of a larger series of Bitcoin movements by German authorities in recent weeks.

Bitcoin price impact

The Bitcoin being sold originates from criminal seizures, primarily from a piracy case earlier this year when Bitcoin was trading at around $46,000. As of the latest data, the German government still holds 26,318 BTC, worth over $1.4 billion at current prices.

The continued liquidation has coincided with downward pressure on Bitcoin’s price, which recently fell below $55,000 before recovering slightly to around $57,590 earlier today. The broader crypto market has also experienced turbulence during this period.

The German government’s approach to handling seized cryptocurrencies has drawn criticism from some quarters. Joana Cotar, an independent Member of the Bundestag, accused the government of lacking a coherent strategy for dealing with Bitcoin. She stated: “I’m not at all sure whether the government was or is aware of the consequences of its sales.”

Mirrored actions, conflicting choices

Germany’s actions mirror similar moves by the US government, which has also been selling seized crypto through exchanges rather than traditional auctions.

The US government recently transferred 4,000 BTC to Coinbase, a move that sparked massive sell-off concerns as the Mt. Gox repayments began last week. Interestingly, Coinbase is still embroiled in a legal tussle with the SEC, and has recently filed a motion to reinforce a DOJ ruling on the Binance case.

While all these moves are happening, the US Marshals Service (USMS) decided to choose Coinbase Prime for its crypto custody requirements. These are conflicting narratives, to say the least, and the market continues to react. Analysts suggest that selling pressure on Bitcoin is unlikely to decrease in the near term, given these concurrent events.

The liquidation of seized crypto assets by governments raises questions about the potential impact on market dynamics and the long-term implications of such practices. Some industry observers argue that by selling large quantities of Bitcoin on public exchanges, governments may be inadvertently contributing to price volatility.

Historical data also indicates that governments may have missed out on significant potential gains by selling Bitcoin too early. Estimates suggest the US could have foregone approximately $370 million in unrealized profits due to premature sales.

Why Germany and the US keep on selling Bitcoin

The question at the core of these massive sell-offs and transfers is this: why, and consequently, what for?

It could be that these governments no longer think that Bitcoin is a viable hedge against inflation, or that it is digital gold, as the alpha crypto’s proponents and maximalists fervently believe.

It could also be that these governments see holding Bitcoin as an inherent risk: despite a steady influx of investments in the space, massive volatility in the past couple of years could be seen as an indicator of the industry’s instability. After all, the crypto industry as it is today is barely a decade old. Even Ethereum, despite being born as a wunderkind, is still making baby steps, so to say.

Or, perhaps more critically, it could be that governments, as centralized entities, aren’t too keen on keeping something that is, at its core, antithetical to how they operate.

This article presents the author’s opinion on recent government Bitcoin sales. The views expressed do not necessarily reflect or represent the official position of Crypto Briefing on the subject.

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