Market Status: Post-German BTC Sale, Potential Pressure from 3 Entities

After nearly a month, the German government finally sold off its BTC holdings, causing BTC to drop to a low of $54,000 before rebounding.

The BTC held by the German government came from the shutdown of the pirated movie site Movie2k.to. After the site was closed, German authorities, with assistance from the FBI, identified the operators behind the site as a Polish man and a German man. Details of the subsequent investigation are scarce, but reports suggest one of the suspects voluntarily handed over the BTC to German authorities. Public information shows that before the sale, the German government held at least 50,000 BTC.

With the anticipation of interest rate cuts and the German government's complete sale of its BTC holdings, BTC began to rebound. However, BTC may still face potential selling pressure from three major entities.

Mt.GOX Compensation

As of July 16, approximately 139,000 BTC remain in Mt.Gox's addresses, indicating that the Mt.Gox sell-off has not yet impacted the market.

Founded in July 2010, Mt.Gox was once the largest cryptocurrency exchange, handling over 80% of all Bitcoin transactions at its peak. In 2013, the exchange was hacked, losing 850,000 BTC, leading to its bankruptcy. Around 200,000 BTC were later recovered. Since 2014, a prolonged compensation lawsuit has been ongoing, with about 60,000 BTC used for various expenses, leaving approximately 140,000 BTC for compensation.

On July 5, 2024, Mt.Gox's bankruptcy trustee Nobuaki Kobayashi announced that partial compensation to creditors in BTC and BCH had been completed through specific crypto exchanges, based on the bankruptcy reorganization plan.

Although multiple institutions and analysts have suggested that most BTC will be held rather than sold, analysis shows that BTC prices tend to drop whenever Mt.Gox initiates liquidation actions. According to Glassnode data, there are about 300,000 BTC on all exchanges. With an estimated net inflow of $16.11 billion from BTC spot ETFs, the anticipated 140,000 BTC compensation, valued at approximately $8.79 billion, represents a significant portion, potentially causing market panic.

U.S. Government Holdings

Blockchain data shows that the U.S. government holds over $13.8 billion in crypto assets, mostly in BTC and ETH, with over 210,000 BTC and more than 50,000 ETH.

The major sources of these holdings include:

• Silk Road Seizure (2020): The U.S. government seized 69,369 BTC from a hacker known as “Individual X,” stolen from the Silk Road marketplace between 2012 and 2013.
• Bitfinex Hack (2022): The government seized 94,643 BTC from Ilya Lichtenstein, which were stolen in the 2016 Bitfinex exchange hack.
• James Zhong Case (2022): The Department of Justice seized 51,326 BTC from James Zhong, also stolen from the Silk Road marketplace.

The U.S. government has amassed a large amount of crypto assets through these seizures. The slow pace of auctioning these assets, combined with ongoing seizures, results in a continuous accumulation of assets. This situation is well-known in the Bitcoin community, leading to speculation about the potential impact of future government sales on prices.

FTX Exchange Compensation



According to a revised reorganization plan and disclosure statement submitted by FTX to the U.S. Bankruptcy Court in Delaware in May this year, FTX expects to collect, convert to cash, and distribute assets valued between $14.5 billion and $16.3 billion, surpassing the $11 billion owed to customers and other non-government creditors. The remaining surplus cash will be used to pay interest to the company's over 2 million customers.

If the plan is approved by the bankruptcy court, it is expected that 98% of FTX creditors will receive approximately 118% of their allowed claim amounts within 60 days of the plan's effective date. However, there is still no consensus on the compensation method due to differing opinions among FTX creditors.

FTX has received court approval for creditors to vote on whether to start the compensation plan in cash or in kind. Creditors must vote by August 16, and Judge Dorsey will decide whether to approve the plan on October 7. Once the reorganization plan is approved by the court, FTX will begin repayment to creditors within two months. The estimated repayment period is the fourth quarter of 2024 to the first quarter of 2025.

Since FTX's liquidation is nearing completion, this portion of the selling pressure can be ignored. Moreover, after compensation, the compensation funds might flow back into the market as additional funds.

Crypto analyst Ash Crypto believes that given most FTX customers are crypto enthusiasts, the $16 billion in funds will enter the crypto market and become the biggest catalyst for price increases. Bitcoin is expected to break $120,000, Ethereum to surpass $12,000, and other altcoins to increase by 10 to 50 times.