The German government aimed to sell its Bitcoin holdings quickly without focusing on minimizing market impact or maximizing profitability.
The selling pattern of the government-labeled wallet, which included large transfers to various centralized cryptocurrency exchanges (CEXs), indicated an intention to cash in short-term profits, according to Miguel Morel, founder of Arkham Intelligence.
Morel noted that the transfers to multiple exchanges were made to maximize Bitcoin liquidity.
He 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?”
He explained that setting up accounts and transferring funds to five different exchanges is more complex than selling through a single one.
The outflows and news surrounding the German government’s Bitcoin sales exerted downward pressure on Bitcoin.
The price of Bitcoin began to recover from June’s downtrend only after the government exhausted its Bitcoin supply.
Bitcoin’s price recovery above the $60,000 psychological mark occurred on July 14, a day after the government-labeled wallet ran out of BTC.
During June, Bitcoin’s price fell over 7% but then staged an over 11% weekly recovery, trading at $64,688 as of 1:50 pm UTC, according to CoinMarketCap data.
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The decline in Bitcoin’s price was not solely due to the German government’s selling.
Other factors, such as the incoming creditor repayments from Mt. Gox and stagnating Bitcoin exchange-traded fund (ETF) flows, also contributed to the price slump.
According to Morel, the volume of Bitcoin sold by the government had less impact on the price than the market’s reaction to the news.
He 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.”
Popular analyst RunnerXBT suggested that a real opportunity to gain long exposure for Bitcoin would come after the market has absorbed the Mt. Gox repayments, similar to the scenario following the German government’s Bitcoin sales.
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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