The price of bitcoin (BTC) has dropped by $10,000 in a matter of days, falling to $92,000. This sharp decline has raised concerns among some traders that the bull run could be coming to an end. However, there are several factors that suggest these fears may be overblown.
Unconfirmed reports from DB News indicate that the Department of Justice (DOJ) has been authorized to liquidate 69,370 BTC ($6.5 billion) that were seized from the Silk Road marketplace.
The report comes just 11 days before President-elect Donald Trump's inauguration. Trump has vowed not to sell any of the 187,236 BTC that is still in possession by the U.S. government, according to Glassnode data. The majority of the tokens in the government's possession comes from the seizures on Bitfinex and Silk Road.
The reports of 69,370 BTC being liquidated at once sound like a lot, but if they are sold, they will most likely be sold in an orderly fashion as they are requested to get the best possible price. At the same time, the market already knew that this was a possibility, so this could have already been baked in to market expectations.
Secondly, the market has absorbed over 1 million bitcoin since September. This can be shown by the decrease in holdings by long-term holders, who are defined by Glassnode as investors who have held bitcoin for longer than 155 days. As a cohort they now hold 13.1 million BTC. However, since September, the price has gone from approximately $60,000 to over $100,000.
Lastly, we have previous data on another government selling a similar amount of bitcoin. The German government sold approximately 50,000 BTC from mid-June to mid-July of 2023. The total value of the coins was around $3.5 billion back then, around half the value now.
However, the market effectively front-ran the selling and the price bottomed out around July 7 at around $55,000 while the German government still had possession of at least 25,000 BTC.
