After sudden large sales of Bitcoin reserves in Germany, both the German and US governments have transferred hundreds of millions of dollars worth of Bitcoin from private wallets to exchanges, sparking speculation about an impending large-scale sell-off.
Despite various speculations about the performance of Bitcoin in late June, it is easy to forget that the actual value of this crypto asset is just a step away from its all-time high valuation, and over a long time span. For a long time, certain world governments, especially the United States, have acquired so much Bitcoin through asset seizures from criminal activities that these insignificant amounts, by standards of a decade ago, have now developed into treasures worth hundreds of millions of dollars. What’s more pressing is that the federal government has been particularly slow in auctioning off these assets while continuing 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 how the future government sales may impact prices. After all, the relationship between the market or profits is largely unrelated to the speed of these auctions, which are determined by the bureaucratic agencies managing any seized assets. In short, the Bitcoin hoarded by these governments is a true unknown factor that could be intentionally manipulated by specific participants in government power or sold indiscriminately, regardless of the potential market impact.
Although the US federal government is the largest government holder, claiming jurisdiction over Bitcoin-heavy enterprises like Silk Road and once holding over 1% of circulating Bitcoin, another auction process seems to have triggered a chain reaction. Specifically, the German government’s $325 million sale shocked the entire community without much prior notice. These major trades were completed in 2 days, and the resulting Bitcoin sell-off pressure led to a 3.5% price drop. Bitcoin’s price was already fluctuating before this event, and these sales definitely did not inspire further bullish sentiment among traders.
Bitrue’s Chief Strategy Officer Robert Quartly-Janeiro 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 amount of Bitcoin,” Quartly-Janeiro said, adding that the German government “believes Bitcoin prices will remain soft in the near future.” In other words, not every jurisdiction has to operate under the same agreements as the US did in the past. The Bitcoin sold in this auction was obtained by Germany after an investigation in 2020, but the actual arrest action did not lead to all related Bitcoin being seized. In fact, local officials claim that the seizure of assets in this case is still ongoing, with over $3 billion seized in January this year. Clearly, unlike some assets of the US government from a decade ago, these Bitcoin are just lying idle in their pockets.
This brings us to recent developments. It turns out there are clear signs that the Germans have not stopped their actions. On June 25, the government transferred more Bitcoin from private wallets to well-known exchanges. Assets worth $24 million were moved to platforms like 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 seized Bitcoin reserves. Nevertheless, it transferred over $425 million in less than a week, causing panic in the market.
What truly escalated this event from a minor incident to a source of panic was the decision by the US government to take similar actions. On June 27, over $240 million worth of Bitcoin was transferred from private wallets to Coinbase, especially wallets related to institutional traders. Additionally, blockchain tracking shows that these Bitcoin were seized from drug dealer Banmeet Singh in 2024. Some of the federal government’s Bitcoin has been stuck in bureaucratic limbo for over five years, yet these Bitcoin could be auctioned off in less than six months.
Of course, the presence of these assets in Coinbase wallets does not guarantee an imminent auction date. However, at a time when prices have already plummeted, this move still instilled fear in the Bitcoin community. Is the US government, this giant holder of over $13 billion in Bitcoin, ultimately deciding to manipulate the market consciously? Or more accurately, are they steadfastly shorting Bitcoin? The officials in Germany who suddenly sold Bitcoin clearly wanted to make a quick profit before Bitcoin entered a long bear market. Such sentiments can have a particularly detrimental effect on the collective behavior and attitudes of traders, and when these decisions are made by industry whales, this effect is compounded. If the US government quickly sells off the $240 million worth of Bitcoin acquired just a few months ago, who knows if they will continue this behavior and sell off several billion dollars? Such sell pressure could trigger a real bear market.
Identifying different motives and participants from these opaque bureaucratic institutions, such as the actual agencies making these decisions, may be particularly difficult. Therefore, studying some actual constraints may be more effective in understanding why this sell-off scenario may not materialize. First, while Germany transferred its Bitcoin to several different wallets, the US sold all of them on Coinbase. As of June 27, this exchange is simultaneously facing lawsuits from the Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC). Coinbase accuses these regulatory agencies of deliberately stifling the cryptocurrency industry and lists some 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 that these agencies have refused or delayed, with no explanations.
This lawsuit reminds us that many exchanges that may handle rapid auctions of billions of dollars in Bitcoin are currently embroiled 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 was embroiled in a devastating lawsuit that led to its CEO being imprisoned. These are just some of the crypto-related companies and exchanges facing various lawsuits in the past few months. Nonetheless, such companies are unlikely to completely prevent the government from auctioning off assets, but the entire business may become more difficult. If a faction within these institutions seeks 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 it may remain a mystery in the foreseeable future. However, Bitcoin holders can rest assured, as an extremely pessimistic scenario is unlikely to materialize. The Bitcoin held by the US government exceeds that of Germany by billions of dollars, and it is unlikely that these Bitcoin will be exchanged for cash unnoticed. We just need to see what actions these and other seized Bitcoin reserves will take in the near future, but until then, any doomsday predictions are pure speculation.
