Crypto Market Surges as Germany Recoups $200M in Bitcoin from Exchanges

The cryptocurrency market received a significant boost in sentiment on Tuesday after a German government entity recovered over $200 million worth of Bitcoin from various exchanges.

During the Asian morning hours, Bitcoin was trading just above $57,300, marking a 3.5% increase over the past 24 hours. Other major cryptocurrencies also experienced gains, with Solana’s SOL surging by 6%, Ether (ETH) climbing back above $3,000, and Dogecoin (DOGE) rising nearly 7%.

The market faced turbulence on Monday when Bitcoin briefly dropped to as low as $55,000 following a transaction of over $900 million linked to the German Federal Criminal Police Office (BKA) to various addresses. This movement initially alarmed traders, but it was later clarified that the BKA received over $200 million back from exchanges like Kraken, Coinbase, and Bitstamp within the past 12 hours.

German Government’s Bitcoin Holdings

The German government had previously confiscated a significant Bitcoin stockpile, valued at approximately $3 billion, from the movie piracy website Movie2k.to. In January, German police seized 50,000 BTC from the site, marking the largest Bitcoin confiscation by German law enforcement.

Starting in mid-June, the government began liquidating over 10,000 BTC, which exerted downward pressure on the cryptocurrency’s market value. Last week, German lawmaker and Bitcoin advocate Joana Cotar called on the government to halt its rapid Bitcoin sales and consider adopting Bitcoin as a “strategic reserve currency” to mitigate risks in the traditional financial system.

Cotar argued that Bitcoin could help Germany diversify its treasury assets, protect against inflation and currency devaluation, and foster innovation within the country. She emphasized that further sell-offs would be counterproductive and not in Germany’s best interests. She noted that other governments, including the United States, are considering or already holding Bitcoin as a reserve currency and invited four German politicians to the “Bitcoin Strategies for Nation States” event scheduled for October 2024.

Impact of German Sell-Off on Bitcoin

Matteo Greco, a research analyst at Fineqia International, highlighted the impact of Mt. Gox repayments and miners’ selling pressure on Bitcoin’s recent price decline. Greco noted that Bitcoin closed the week at around $55,850, representing an 11% decrease from the previous week’s closing price. Strong selling pressure was evident throughout the week, with Bitcoin briefly trading as low as $53,500 before rebounding.

The commencement of Mt. Gox repayments and ongoing selling pressure from miners, following the recent halving, contributed to high on-chain selling pressure. Bitcoin miners are currently facing a phase known as “capitulation,” where diminished profits force them to reduce operations or sell a portion of their mined Bitcoin and reserves to sustain their activities, earn yield, or hedge their Bitcoin exposure.