What's next for Bitcoin as German government dries its holdings?
|- The German government may have sold all of its $2.9 billion worth of Bitcoin.
- Increased bearish pressure has seen the S&P 500 outperforming Bitcoin in the past five weeks.
- On-chain data suggests Bitcoin has potentially reached a bottom and may rebound or face heavier corrections.
Bitcoin (BTC) investors are preparing for the weeks ahead after the German government transferred out its last holdings on Friday. While the outlook appears bearish on the surface, price action and on-chain data reveal deeper insights into Bitcoin's new shape.
Bitcoin's performance has more to it than meets the eye
The German government has potentially sold all the 50,000 Bitcoin seized from pirated movie website Movie2k.to. According to analytics firm Arkham Intelligence, the government transferred its last BTC tokens — 3846.05 BTC ($223.81M) — to Flow Traders and 139Po (likely institutional deposit/OTC service).
German Goverment BTC Balance
When the German government began transferring the tokens to several exchanges, including Coinbase, Kraken, Bitstamp, etc., last month, they were worth about $2.9 billion.
Despite the German government offloading out of the way, Bitcoin still faces several headwinds, including Mt. Gox BTC repayment, miners selling to cover operation costs and bearish sentiments surrounding poor historical Q3 returns. Data from Kaito AI shows that the Bitcoin sentiment score is approaching zero and has reached a level last seen when BTC's price was around $26,000.
Following the increased bearish narrative, Bitcoin has diverged from the general US stock market in the past five weeks. While Bitcoin declined about 19.4% in the past week, the S&P 500 rose more than 5%, with several blue chip stocks reaching new highs. However, BTC's lag may see it play a bullish catch-up, considering crypto's largest bull run often occurs with little or no reliance on the equities market, according to crypto analytics firm Santiment.
BTC, Gold, S&P 500 Price Comparison
This aligns with predictions from CryptoQuant, which highlights that Bitcoin is at a critical juncture. Bitcoin reached a four-month low after reaching $53,000 last week. The move saw both long-term and short-term holders experience losses of about $1 billion and traders facing unrealized margins of -17% — a loss level last seen since the FTX collapse days. These two factors indicate a potential price bottom.
The price drop also saw whales buying the dip as their holdings are growing at a 6.3% month-to-month rate. Bitcoin ETFs also saw positive net flows this week, indicating high buying pressure from investors.
While these factors prime BTC for growth in the coming weeks, CryptoQuant noted that the declining USDT market cap and ongoing miners' sales suggest Bitcoin may either "stabilize at a local bottom" or experience heavy corrections like that of summer 2021.
USDT Market Cap Change & Bitcoin Price
Bitcoin, altcoins, stablecoins FAQs
Bitcoin is the largest cryptocurrency by market capitalization, a virtual currency designed to serve as money. This form of payment cannot be controlled by any one person, group, or entity, which eliminates the need for third-party participation during financial transactions.
Altcoins are any cryptocurrency apart from Bitcoin, but some also regard Ethereum as a non-altcoin because it is from these two cryptocurrencies that forking happens. If this is true, then Litecoin is the first altcoin, forked from the Bitcoin protocol and, therefore, an “improved” version of it.
Stablecoins are cryptocurrencies designed to have a stable price, with their value backed by a reserve of the asset it represents. To achieve this, the value of any one stablecoin is pegged to a commodity or financial instrument, such as the US Dollar (USD), with its supply regulated by an algorithm or demand. The main goal of stablecoins is to provide an on/off-ramp for investors willing to trade and invest in cryptocurrencies. Stablecoins also allow investors to store value since cryptocurrencies, in general, are subject to volatility.
Bitcoin dominance is the ratio of Bitcoin's market capitalization to the total market capitalization of all cryptocurrencies combined. It provides a clear picture of Bitcoin’s interest among investors. A high BTC dominance typically happens before and during a bull run, in which investors resort to investing in relatively stable and high market capitalization cryptocurrency like Bitcoin. A drop in BTC dominance usually means that investors are moving their capital and/or profits to altcoins in a quest for higher returns, which usually triggers an explosion of altcoin rallies.
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