The Bitcoin market is known for its unpredictable nature, often experiencing significant fluctuations caused by the actions of influential players known as “whales” and even government entities. Recently, there have been allegations of government sales, such as those by the German government, which have added to the market’s volatility. However, according to Ki Young Ju, the CEO of CryptoQuant, the impact of these government influences may not be as severe as commonly thought.
In the past few weeks, it has been observed that addresses associated with the US and German governments have moved a substantial amount of Bitcoin, totaling around US$737 million, to established exchanges like Coinbase, Bitstamp, and Kraken. These transactions have been interpreted as signs of liquidation, coinciding with a decline in the value of Bitcoin that persisted throughout the month. Despite this concerning trend, Ju emphasizes that the situation is not as dire as it appears.
Analysis conducted by CryptoQuant reveals that out of the total volume moved in the Bitcoin market since 2023, which exceeds US$224 billion, only approximately 4% consists of assets confiscated by government authorities. In terms of value, this amounts to roughly $9 billion, which has been added to Bitcoin’s realized market value since last year. When compared to the overall market, this figure is relatively modest, suggesting that government-owned Bitcoins have a limited impact on the market as a whole.
Ju further asserts that the concept of realized market capitalization provides a better understanding of Bitcoin’s value. This approach takes into account the price at which each Bitcoin was last traded, offering a clearer view of the actual amount of fiat currency invested in the cryptocurrency and providing a more accurate portrayal of its value.
Despite recent corrections, which have been the most significant since the beginning of the previous bull cycle in 2022, caution is still advised when it comes to Bitcoin. In order to maintain an upward trajectory, prices need to recover to the US$60,000 level.
While significant liquidations, including those by governments, can induce short-term volatility and price declines, their long-term impact seems to be exaggerated. The Bitcoin market has shown resilience, and its maturity is likely to be influenced more by institutional investments than by large isolated transactions.
Disclaimer: The opinions expressed in this article, whether by the author or any individuals mentioned, are solely for informational purposes and should not be considered financial or investment advice. Investing or trading cryptocurrencies carries the risk of financial loss.
Editor’s Choice: The German government has recently transferred 832.7 BTC and reduced its Bitcoin holdings. There is also a belief among analysts that Ethereum could surpass Bitcoin following the launch of ETFs.