The German government was looking to sell its Bitcoin stack as soon as possible, without optimizing for the smallest market impact and best profitability.
The German government-labeled wallet’s Bitcoin (BTC) selling patterns, including the large transfers to various centralized cryptocurrency exchanges (CEXs), suggest that the intention was to cash in profits in the short term, according to Miguel Moreno, the founder of Arkham Intelligence.
The transfers to multiple exchanges occurred to maximize Bitcoin liquidity, Moreno told Cointelegraph during an interview at EthCC:
“The last thing I would have expected is that they would just go to five different exchanges and start market selling… The fact that they’re going to so many different exchanges just reads like they’re just trying to get as much liquidity from each order book as possible, because otherwise, why wouldn't you just use one?”
Setting up accounts and transferring funds to five different exchanges is more complicated than selling through a single one, Moreno explained.
Outflows and news surrounding the German government’s Bitcoin selling have put downward pressure on Bitcoin, which was only able to recover from June’s downtrend once the government ran out of Bitcoin to sell.
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Bitcoin price started recovering after German government ran out of Bitcoin
Bitcoin price has been in a downtrend during the month of June and it only started recovering once the German government started running out of Bitcoin to sell.
Bitcoin price recovered above the $60,000 psychological mark on July 14, a day after the German government-labeled wallet ran out of BTC.
Bitcoin price fell over 7% during the month of June, but staged an over 11% weekly recovery, to trade at the $64,688 mark, as of 1:50 p.m. in UTC, according to CoinMarketCap data.
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Bitcoin price was tanked by the German government’s selling reports, not the BTC sales volume
The German government’s selling wasn’t the only factor weighing down Bitcoin price during the past month. Factors like Mt. Gox’s incoming creditor repayments and stagnating Bitcoin exchange-traded fund (ETF) flows have also contributed to the price slump.
According to Arkham’s Moreno, the volume of Bitcoin sold by the German government had less impact on Bitcoin price, than the market’s reaction to the news.
Moreno explained:
“It could well be that there's $20 billion of Bitcoin volume a day, and the German government selling $60 million a day is easily absorbed. It could also be the case that because there's news of the German government selling… there's $5 billion going out the door on the retail side because they're afraid of getting caught.”
However, the real opportunity to get long exposure for Bitcoin will come after the market has digested the Mt. Gox repayments, similar to the scenario following the German government’s Bitcoin selling, according to popular analyst RunnerXBT.
The analyst wrote: "Just like with Germany transfers, eventually, they will have no price impact. That’s when I hope to long.”
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