July 22, 2024

Large Amounts of Seized Bitcoin and Ethereum Dumped on Exchanges by German and U.S. Governments

German and U.S. Governments Move Large Crypto Holdings Including Seized Bitcoin and Ethereum

German and U.S. Governments Move Large Crypto Holdings Including Seized Bitcoin and Ethereum

The German and U.S. governments have recently executed large cryptocurrency transactions. These transfers, involving large amounts of Bitcoin (BTC) and Ethereum (ETH), are part of the governments’ broader asset management strategies, often linked to seized criminal assets. But these moves also have market implications on the long run.

German and U.S. Government Move Bitcoin and Ethereum

Both the German and U.S. governments have accumulated substantial crypto holdings through legal seizures related to criminal activities. For example, Germany has seized Bitcoin from darknet marketplaces, while the U.S. has obtained crypto from various cybercrime and illegal trade crackdowns. Managing these assets involves deciding whether to hold, sell, or redistribute the crypto, often leading to large transactions visible on the blockchain.

Both countries have now started to move their crypto assets.

The German government has recently moved 1,500 BTC, valued at approximately $94 million, to exchanges like Bitstamp, Coinbase, and Kraken. This move follows previous transactions, with a total of 2,700 BTC transferred in the past two weeks. Despite these sales, the German government still holds a considerable amount of Bitcoin, totaling 46,359 BTC.

And just today they sent another 282 Bitcoin to exchanges as you can see below.

Meanwhile, the U.S. government moved 3,375 ETH, worth around $11.75 million, from seized funds to an unknown wallet address. These ETH transfers are equally part of broader asset management strategies involving cryptocurrencies obtained through various seizures. Note that the U.S. government is still holding over 30,000 BTC from the Silk Road seizure and additional Bitcoin from other confiscations​.

The Impact of These Crypto Moves

The Impact of These Crypto Moves
The Impact of These Crypto Moves

The transfers contributed to a large drop in Bitcoin’s price, which fell to around $64,000. The market reacted to the substantial influx of Bitcoin, increasing selling pressure and leading to a decline in price. The combined effect of government sales and large outflows from Bitcoin ETFs resulted in this price drop. Specifically, large ETF withdrawals, including from Grayscale Bitcoin Trust and Fidelity Wise Origin Bitcoin Fund, further pressured the market, contributing to Bitcoin’s decline.

Ethereum also experienced some price fluctuations due to market sentiments influenced by these large transactions. However, the direct impact on Ethereum’s price was less pronounced compared to Bitcoin, as the primary movements involved Bitcoin assets​.

Reasons for The Transfers

The German and U.S. governments’ recent sales of cryptocurrency are likely driven by several factors. One primary reason is the management of seized assets as we explained earlier. When law enforcement agencies confiscate cryptocurrencies from criminal activities, they often liquidate these assets to convert them into fiat currency, which is easier to manage and use for funding various government operations or to compensate victims.

The strategic management of these assets involves careful planning to minimize market disruption. Governments also use various tactics to avoid market impacts. This includes spreading out transactions over time and utilizing multiple exchanges. However, with such large sums it’s literally impossible not to disrupt the market of course.

Additionally, selling large amounts of crypto at current market prices can help to lock in gains, especially if the market is perceived to be volatile or peaking. Governments also aim to minimize the risk associated with holding large amounts of cryptocurrency, which as we all know can be subject to market fluctuations and cybersecurity threats.

However, there might be a more sinister idea behind it too…

These sales could actually also be part of a broader strategy to influence market dynamics or to demonstrate regulatory actions against illegal activities involving cryptocurrencies. By moving large amounts of Bitcoin and Ethereum to exchanges, governments can signal their intentions to monitor and regulate the crypto market more closely.