Germany Begins Selling Its Bitcoin Billions, Triggering Volatility Fears

The German government is starting to sell its sizable stash of Bitcoin that was seized from the operators of a movie piracy website, sparking concerns about its potential impact on the cryptocurrency market.

The government has apparently sold over $195 million in BTC within the past 24 hours, according to blockchain analytics firm Arkham, and had moved around even larger sums on Wednesday between multiple wallets.

This significant move follows a recent pattern of large-scale Bitcoin transactions initiated by German authorities, with substantial amounts being funneled to major exchanges such as Coinbase, Kraken, and Bitstamp. That could suggest even more selling to come.

In the latest transactions, the German government transferred $65 million worth of BTC to likely exchange deposits, adding to the $130 million moved yesterday. Despite these massive apparent sales, German authorities still hold a substantial $3.05 billion worth of Bitcoin.

This extensive Bitcoin cache, nearly 50,000 BTC, was originally seized from the operators of Movie2k.to, a film piracy website that was last active in 2013. The Bitcoin was transferred to the German Federal Criminal Police Office (BKA) in mid-January following a voluntary handover from the suspects, per Arkham.

The large-scale sale has already had a noticeable impact on Bitcoin’s market price, according to Robert Quartly-Janeiro, chief strategy officer at crypto exchange Bitrue. He also believes that it suggests a bearish perspective for the German government.

"Having seen a slippage in the price of BTC, the German government is releasing significant tranches of BTC and has taken a view that the price of BTC is to soften for a while to come,” he told Decrypt. “It’s worth remembering that the BTC being sold was seized due to illicit activity, so what’s more interesting is what the German government is planning to do with the capital once sold."

He added that the size of the sale has dragged BTC lower as a result. Bitcoin is down about 0.5% over the past 24 hours to a current price of about $64,700, pushing its 14-day dip to nearly 9% as of this writing. Quarterly-Janeiro believes there’s clearly a strategy at play, and that the timing of the next tranche to be sold will be telling. 

“Could they close the position completely? Maybe so," he said.

Ben Kurland, CEO of token management platform DYOR Labs, highlighted the historical implications of such sales in a comment to Decrypt. 

"Historically, significant Bitcoin sales by governments lead to immediate price declines and short-term volatility,” he said. “Mid-term effects can vary, however prolonged selling would cause further slumps as negative sentiment grows. It’s wise to exercise caution until the remaining BTC is either sold off or moved off exchanges, as government-held BTC is unlikely to remain on centralized exchanges for long."

The ongoing liquidation by the German government has injected a dose of volatility into the crypto market, with investors and market analysts watching for further movements and potential impacts on Bitcoin’s price.

James Davies, co-founder and Chief Product Officer of Crypto Valley Exchange, told Decrypt that he doesn’t believe that there is “any market sentiment behind” the selling, and that it’s probably “more a function of not holding assets in Bitcoin” with the police department “simply slowly liquidating this seizure.”

In any case, he expects it to be a “boon time for over-the-counter traders,” but will result in “some short-to-medium-term volatility for the rest of us.”

Edited by Andrew Hayward