Germany and the United States are selling their Bitcoin reserves and transferring funds to exchanges, raising concerns about a massive sell-off and causing market price anxiety.
Germany and the United States governments have both transferred hundreds of millions of Bitcoins from private wallets to exchanges, triggering speculation of a large-scale sell-off. Despite various speculations about Bitcoin’s performance in late June, it is easy to forget that the actual value of this cryptocurrency is just a step away from its all-time high, and the time span is very long. For a long time, certain governments, especially the United States, have acquired so many Bitcoins through the confiscation of criminal assets that these insignificant amounts, by the standards of ten years ago, have grown into a treasure worth billions of dollars. What’s more urgent is that the federal government is slow in auctioning off these assets while continuing to make new seizures, making it one of the largest whales in the entire industry.
This situation is a well-known factor in the Bitcoin community and has sparked speculation about the potential impact of future government sales on prices. After all, any relationship with the market or profitability is largely unrelated to the speed of these auctions, which is set by bureaucratic agencies responsible for managing confiscated assets. In short, the Bitcoins hoarded by these governments are a true unknown factor, which may be deliberately manipulated by specific participants in government power, or may be sold without considering the potential market impact.
Although the US federal government is the largest government holder, claiming jurisdiction over Bitcoin-heavy companies such as Silk Road and once holding over 1% of circulating Bitcoins, another auction process seems to have triggered a chain reaction. Specifically, the German government shocked the entire community with a $325 million sale, with almost no prior announcement. These major transactions were completed within two days, and the resulting Bitcoin sell-off pressure caused a 3.5% price drop. The price of Bitcoin was already fluctuating before this event, and these sales certainly did not inspire further bullish sentiment among traders.
Robert Quartly-Janeiro, Chief Strategy Officer of Bitrue, even claimed that this decision was a deliberate strategy rather than a planned release of Bitcoin. “Seeing the BTC price drop, the German government released a large number of Bitcoins,” Quartly-Janeiro said, adding that the German government “believes that the Bitcoin price will remain weak in the near future.” In other words, not every jurisdiction has to operate according to the same agreements as the United States in the past. The Bitcoins sold this time were obtained by Germany after an investigation in 2020, but the actual arrest did not result in all the related Bitcoins being seized. In fact, local officials claim that the confiscation of this case is still ongoing, with over $3 billion seized in January this year. Obviously, unlike some assets of the US government ten years ago, these Bitcoins are just idle in their pockets.
This brings us to the recent developments. It turns out that there are clear signs that Germans have not stopped their actions. On June 25th, the government transferred more Bitcoins from private wallets to well-known exchanges. Assets worth $24 million were transferred to the platforms of Coinbase and Kraken, while another $30 million was transferred to an unknown wallet. It should be noted that Germany still controls the vast majority of its overall confiscated Bitcoin reserves. Nevertheless, it transferred over $425 million in less than a week, causing panic in the market.
What really turned this incident from a minor episode into a source of panic was the US government’s decision to take similar measures. On June 27th, Bitcoins worth over $240 million were transferred from private wallets to the Coinbase platform, especially wallets associated with institutional traders. In addition, blockchain tracking shows that these Bitcoins were seized from drug dealer Banmeet Singh in 2024. Some of the federal government’s Bitcoins have been in bureaucratic deadlock for over five years, but these Bitcoins may be auctioned off in less than six months.
Of course, the actual auction date of these assets in Coinbase wallets is not guaranteed. However, this move still worries the Bitcoin community when prices have already plummeted. Is the US government, the giant holding over $13 billion in Bitcoins, ultimately deciding to manipulate the market consciously? Or, more precisely, are they firmly shorting Bitcoin? The German officials who suddenly sold Bitcoins clearly wanted to make some quick money before Bitcoin entered a long bear market. Such sentiment can have a particularly detrimental effect on traders’ collective behavior and attitudes, and this impact is multiplied when these decisions are made by industry whales. If the US government quickly sells the $240 million Bitcoins obtained just a few months ago, who knows if it will continue this behavior and sell billions of dollars? Such selling pressure could trigger a real bear market.
It may be particularly difficult to identify different motivations and participants from these opaque bureaucratic institutions, such as the institutions that actually make these decisions. Therefore, studying some actual limitations may be more effective in understanding why this sell-off scenario may not materialize. First of all, although Germany has transferred its Bitcoins to several different wallets, the US has sold them all to Coinbase. As of June 27th, this exchange is currently suing the Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC). Coinbase accuses these regulatory agencies of intentionally stifling the cryptocurrency industry and cites a number of events as evidence of government distrust. The most credible part of their argument seems to be a series of Freedom of Information Act (FoIA) requests filed by Coinbase, which these agencies have refused or delayed without any explanation.
This lawsuit reminds us that many exchanges that may handle the rapid auction of billions of dollars in Bitcoins are currently in legal battles with the federal government! Coinbase is currently involved in other legal disputes; Kraken, the alternative exchange in Germany, became a target at the end of last year; and Binance is involved in a devastating lawsuit that has resulted in its CEO being imprisoned. These are just a few examples of cryptocurrency-related companies and exchanges facing various lawsuits in the past few months. However, such companies are unlikely to completely prevent governments from conducting auctions, but the entire business may become more difficult. If there is a faction in the relevant institutions seeking faster profits from the auction system, they may not proceed smoothly.
Ultimately, we have no way of knowing the intent behind the US government’s transfer of these funds. Many questions remain unanswered, and they may remain a mystery in the foreseeable future. However, Bitcoin holders can rest assured that the extreme pessimistic scenario is unlikely to occur. The US government holds billions of dollars more in Bitcoins than Germany and cannot convert these Bitcoins into cash without attracting attention. We just need to see what actions these and other confiscated Bitcoin reserves will take in the near future, but before that, any doomsday predictions are purely speculation.