Bitcoin and the general market appear to have steadied their ship after gaining some momentum to build on in the first week of the year. Unfortunately, the sector appears to be back where it started, with the total market capitalization falling by almost 3% in the past week.
One event that may have precipitated such a bearish market climate was the approval of the US Department of Justice (DOJ) plan to unload seized Bitcoin assets. Due to the large volume of coins, there is a general feeling that a market decline may be on the horizon.
Is a market decline looming?
In a recent post on Platform As reported by Bitcoinist, the Department of Justice has been authorized to sell more than 69,000 bitcoins (worth more than $6 billion at the current market price).
In it a reportGlassnode noted large Bitcoin sales by governments in the past, starting with the German administration’s sale of 56,000 Bitcoin in July 2024. According to the blockchain company, the market absorbed the downward pressure, with the price of Bitcoin jumping from $53,000 to $68,000 instead of $53,000. to retreat.
However, Glassnode pointed out that this was not always the case for Bitcoin’s price when large amounts of BTC were offloaded. In this particular scenario, the cross-chain analytics firm highlighted two metrics (net exchange flows and net unrealized gains/losses (NUPL)) to gauge how the market would react to a potential DOJ sale.
Source: Glassnode/X
Specifically, Glassnode highlighted the market’s response when the 30-day simple moving average (SMA) of exchange flows reached around 70,000 BTC. For example, when exchange flows reached +70,500 BTC in March 2021, with NUPL at around 0.72 (suggesting euphoria/greed), the market saw a correction before recovering months later.
In June 2022, exchange inflows of 68,700 BTC and a NUPL of 0.21 (signaling a capitulation) saw the market enter a year-long bear market – due to the collapse of LUNA. From the analysis of these metrics, it can be concluded that the impact of a potential US government sale of this volume depends on the current market situation.
With market sentiment (based on NUPL) currently in a state of belief/deny, there is a possibility that the market will be able to absorb potential selling pressure from the US government sell-off. However, it should be noted that investors showing cautious optimism may not be enough to keep the Bitcoin price afloat when large amounts of coins hit the open market.
Bitcoin price at a glance
As of this writing, Bitcoin is at around $94,700, reflecting a 2.4% increase in the past day. This single-day action shows that the major cryptocurrency may see a rebound after a horrific weekly performance. According to CoinGecko data, the price of Bitcoin has fallen by approximately 4% in the past seven days.
The price of BTC on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView