In this post:
- The USA, UK, Germany and El Salvador are among top holders, but not all governments are sellers.
- Spot selling from crypto insiders and miners may be more influential if panic sets in.
- Liquidations extend the price effect more than spot selling from whale wallets.
large-scale portfolios. Selling from an old stash held by the German government also added to the price pressure on Bitcoin (BTC). Now, more data is emerging on government holdings and selling activity.
Arkham, one of the crypto data projects supported by Binance Labs, is revealing how governments have the potential to sway the Bitcoin (BTC) market. The data on government holdings is also suggesting the scale of the potential selling pressure. Depleting the wallets may signal a more bullish period.
For now, government holdings are valuated in the billions. Hundreds of BTC leave those wallets to be traded on the open market, using leading centralized exchanges like Binance, Coinbase, or Kraken. Arkham has tracked big holders and entities, but now increased the opportunities to compare government wallets and their overall value.
As of July 8, the selling has not abated, and the German government is the most active. Recent selling slashed its holdings to around $2.7B based on current BTC prices.
Not all governments are sellers
The US government has the biggest claim of the total BTC supply, holding an estimated $12B of coins, or around 1% of the total supply. The US government was also among the most active sellers.
The UK government holds $3.3B worth of BTC, most seized in a 2021 crime strike. The German government sits on $2.7B and is among the most active sellers in June and July.
The El Salvador government only holds $314M in its BTC treasury, and is a long-term net buyer. Other government wallets send their tokens to big exchanges, and presumably use their OTC desk. However, the price action suggests some selling may be happening on the open market.
Additionally, the Bulgarian government is an outlier. Allegedly, the country confiscated computers carrying 213,000 BTC, putting Bulgaria in close competition with the second biggest holder. However, the wallets were password-protected and the government cannot access the coins or sell them.
Are governments the biggest problem on the market?
Whales were closely watched in the past quarter, as the BTC market moved down from its peak in March. However, governments are not the biggest sellers. In fact, their holdings may run out relatively quickly, especially if bullish interest returns.
Other whales can be found among miners, who are pressured to sell for operating costs. Additionally, short-term, newly made whales are still in danger of shedding their holdings.
The latest slide of BTC to the $55,000 range means some of the recent buyers are out of the money. Panic-selling may be a much bigger factor compared to pressure from government wallets.
The other big concern will be the selling of BTC from the wallets of early Mt. Gox traders. Those traders are expected to trade at least a few of their BTC, after being turned into reluctant holders since 2013.
Sellers produce new whales
Whale selling is also not always a disaster for the market. There is still demand for coins held in a self-custodial wallet, so both retail traders and whales are buying and withdrawing BTC from exchanges. Even ETF buying returned after the last volatile week. The sellers of significant holdings also produce new whales and boost wallets with more than 10K coins.
Derivative trading is also a key factor in determining short-term price fluctuations. Liquidations accelerated the price slide. The latest price correction led to the second-biggest liquidation, only comparable to the one triggered by the crash of the FTX exchange.
The other theory about whales is that their behavior is deliberate. Some are seen as making sell orders to shake out retail traders or cause liquidations. Additionally, famous whale wallet Mr. 100 has been noticed in re-accumulation mode. On Bitfinex, another whale is also seen as buying up BTC at the new lower prices.
BTC also manages to quickly compensate the losses. After dipping to the $55,000 range, BTC quickly regained positions to trade at $57,226.99. Despite the current price moves, BTC has relatively low volatility at under 2%. Yet in the short term, volatility doubled after a new low of 1% at the beginning of July.
