Bitcoin has been falling recently, which is due to the German government, the US government and Mt. Gox selling Bitcoin. The German government's large-scale selling of Bitcoin has deeply triggered market fluctuations and aroused widespread discussion about cryptocurrency as a strategic asset. However, Federal Reserve Chairman Jerome Powell emphasized that the US central bank has made progress in fighting inflation, which has stabilized the price of Bitcoin.
German government sells off Bitcoin
The German government’s selling of Bitcoin was not a sudden move, but had a profound economic and political background. Police in the German state of Saxony confiscated nearly 50,000 bitcoins in mid-January this year, which originated from a closed movie piracy website. The management and disposal of this huge Bitcoin reserve has naturally become a problem that the German government needs to face. The German Federal Criminal Police Office (BKA) chose to gradually sell the Bitcoins, and despite the impact on market sentiment, Bitcoin prices have still achieved significant growth over the past year. Starting in June 2024, BKA gradually sold part of its Bitcoin reserves. In June, it sold 900 Bitcoins, totaling approximately US$52 million; and subsequently sold 3,000 Bitcoins, valued at approximately US$172 million; and another 2,739 Bitcoins were issued, worth approximately US$155 million. Throughout June and July, BKA continued to sell. As of now, BKA still holds approximately 32,488 Bitcoins, with a current valuation of approximately US$1.9 billion.
The impact of selling on the market
The German government’s sell-off has had a significant impact on the cryptocurrency market. First of all, the large-scale Bitcoin sell-off directly led to an increase in market supply, which in turn put pressure on the price of Bitcoin. The price of Bitcoin once fell to the lowest level since February 2024. Bitcoin, as a decentralized digital currency, The price of currency is usually affected by various factors such as market supply and demand, investor confidence, etc. A massive government sell-off could be seen as a negative signal for Bitcoin, leading some investors to doubt its future value, further affecting market sentiment.
Although CoinShares head of research James Butterfield noted that these sell-offs had a relatively small actual impact on the market, they significantly affected market sentiment.
Meanwhile, the speech by Federal Reserve Chairman Jerome Powell also had some impact on the Bitcoin market. Powell emphasized the Fed's progress in fighting inflation and avoided questions about the timing of rate cuts. However, traders expect a 71% chance of a rate cut in September. Zach Pandl, head of research at Grayscale, believes that lower interest rates could weaken the value of the dollar and support the price of Bitcoin, and believes that the price of Bitcoin could retest its highs later this year.
Inflation, according to the Fed's preferred measure, rose 2.7% in April from a year earlier. Earlier this month, Powell said inflation "remains too high," a stance he echoed on Tuesday. "Early in the year, we lacked progress toward our 2% inflation goal, but our most recent monthly meetings showed we have made further progress," Powell said. "We do not believe it would be appropriate to lower our target range until we have greater confidence."
Powell's speech and the Fed's policy moves have an important impact on the market, especially the Bitcoin market. At the beginning of Powell's testimony, the price of Bitcoin rose slightly from $57,300 to around $57,800, and then stabilized at around $57,500.
When the Fed cut rates in 2020, Bitcoin’s price subsequently surged. Pandler said he “still believes Bitcoin’s price could retest its highs later this year.”
The debate on Bitcoin as a strategic asset to hold
The German government’s decision to sell Bitcoin has sparked controversy. German Bundestag member Joanna Cota criticized the government’s strategy and advocated holding Bitcoin as a strategic reserve currency. Cota’s views reflect an ongoing debate within German politics about the long-term effects of divesting such a valuable digital asset.
From a strategic reserve perspective, Bitcoin has some unique advantages.
1. Bitcoin is a decentralized digital currency that is not controlled by any central agency and has high security and censorship resistance.
2. Bitcoin has a limited supply and is scarce, which gives it the potential to maintain and increase its value to a certain extent.
3. As the global digitalization process accelerates, cryptocurrencies such as Bitcoin may play a more important role in the future financial system.
But holding Bitcoin as a strategic asset also comes with some challenges and risks.
1. Bitcoin’s price fluctuates greatly and its market risk is high, which makes it unsuitable as a stable reserve asset in the traditional sense.
2. The cryptocurrency market is still in its early stages of development, lacking effective supervision and regulation, and presenting many uncertainties and risks.
3. Bitcoin technology and applications are still developing and evolving, and there is a certain degree of uncertainty in its future development prospects.
The German government’s stance and future prospects
The German government's Bitcoin selling event has triggered deep thinking among crypto enthusiasts. Global investors and regulators will pay close attention to Germany's Bitcoin reserves, and its subsequent selling or holding decisions will continue to affect the market.
The German government’s actions may also trigger other countries to review and adjust their cryptocurrency policies.
For blockchain users, it is necessary to pay close attention to the attitudes and policy changes of various governments towards cryptocurrencies, as well as market dynamics. When investing in cryptocurrencies such as Bitcoin, one should fully understand the market risks, rationally allocate assets, and avoid blindly following the trend. At the same time, one should also actively participate in the development and regulation of the cryptocurrency market to promote the healthy and orderly development of the market. And we also need to continue to learn and adapt to grasp the opportunities and challenges brought by cryptocurrencies.
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