The German state of Saxony has been rapidly depleting its Bitcoin reserves after seizing assets from the film piracy website, Movie2K. The government has been auctioning off confiscated Bitcoin, with transactions totaling around $3 billion worth of BTC. On Thursday, German authorities transferred 10,567 BTC (approximately $600 million) to various entities, including Bitstamp, Coinbase, Kraken, Flow Traders, and Cumberland DRW. This marked a significant decrease from the nearly 50,000 BTC that the wallets held when the sell-off began three weeks ago.
Blockchain data from Arkham Intelligence shows that the transactions occurred in multiple batches throughout the day. As a result, the wallets now only hold 6,894 BTC (valued at $394 million). However, there have been instances where wallets received portions of the transferred assets back from exchanges and brokers before the end of the day, sometimes in the $10 million range. Greg Cipolaro, head of research at digital asset manager NYDIG, has described this on-chain activity as “perplexing” in a Wednesday note.
The sell-off of Bitcoin by the German government has been causing concern among crypto investors, as it has been linked to a recent downturn in asset prices due to fears of oversupply. Bitcoin activist Joana Cotar has criticized the German government for not adopting the asset as a “strategic reserve currency” to protect against risks in the traditional financial system. The U.S. government, on the other hand, has moved $240 million worth of seized BTC related to Silk Road to Coinbase, while the defunct Japanese exchange Mt. Gox has transferred its Bitcoin to creditors. These actions have raised concerns among investors, given the decline in BTC’s value during these sell-offs.
Despite fears about looming sell pressure impacting the market, NYDIG’s Cipolaro believes that these concerns may have been exaggerated. He noted that Bitcoin’s decline exceeded the expected price impact if all potential selling materialized. Currently, Bitcoin is trading at $57,281, down 6% over the last week and 15% over the last month. The series of bearish events has pushed the Crypto Fear & Greed Index, an indicator tracking market sentiment, into the “Extreme Fear” zone for the first time since January last year.
Overall, the impact of the German state of Saxony depleting its Bitcoin reserves through a sell-off of confiscated assets has sparked concerns among investors about oversupply and market stability. Critics have pointed out the missed opportunity for the German government to adopt Bitcoin as a strategic reserve currency. Moving forward, it remains to be seen how these sell-offs will impact the overall cryptocurrency market and investor sentiment.