Crypto for Sale: Price Impacts of Germany’s BTC Liquidation, Mt. Gox, and ETF Flows

Bitcoin, ethereum, and other cryptocurrencies have recently faced significant selling pressure after getting off to a scorching start to 2024. In the past few weeks alone, Germany has sold some 50,000 bitcoin it seized from a movie piracy site, defunct exchange Mt. Gox has begun repaying creditors with bitcoin and bitcoin cash, and Golem, one of the earliest ICOs, unloaded 26,000 ether to various exchanges.

In Gemini’s latest analyst note, “Crypto for Sale: Price Impacts of Germany’s BTC liquidation, Mt. Gox and ETF Flows,” Gemini delves deeper into crypto's recent volatility.

Here are a few major takeaways:

• Germany’s decision to unload roughly $3 billion in seized bitcoin was likely a driving force behind the bitcoin price dropping from roughly $65,000 to $55,800 in early July. Granted, it’s impossible to ascribe direct causality between daily German bitcoin sales and price. The largest transfers from German wallets to exchanges occurred after the sell-off. However, the nonlinear nature of price adjusting to the emergence of a determined, large-scale seller fits a well-trod pattern established across asset classes.

• Mt. Gox’s repayment plan could continue to impact markets: The long-anticipated Mt. Gox distributions could have a major impact on prices of bitcoin and Bitcoin cash, but it depends on a few factors. What fraction of the owners of the nearly 140,000 bitcoin recovered in the bankruptcy process opted to receive disbursements? What fraction of the bitcoin received by creditors will make it to market for sale? The presence of a long-running secondary market in Mt. Gox claims makes answering the latter question particularly difficult. Mt. Gox originally went bankrupt in 2014, and after nearly a decade, begun repaying creditors in early July.

• Inflows for centralized exchanges reveal patterns: Recently, analysts saw some shift toward net inflows for both bitcoin and ether in major centralized exchanges when aggregated with a rolling 14-day sum, particularly in the second half of June and first week of July. While this tends to be a feature of downward price movement, the values remain well within the margin for recent years.

• A major buyer emerges for spot bitcoin ETFs: This shift to contrarian-style investment behavior could be driven by a desire to maintain a certain portfolio allocation weighting to bitcoin. It may also indicate that for spot ETF investors, the negative supply-related risk factors discussed above have not shifted conviction in a broader cyclical uptrend. Investors who are allocating into spot bitcoin ETFs may be new entrants to the market that did not previously have direct access to spot bitcoin, and are using this market dip as an opportunity to increase exposure to bitcoin.

Onward and upward!

Team Gemini

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