Data analysis: German selling may not be the main reason for the recent decline in Bitcoin

Germany’s sale of Bitcoin has been a hot topic recently. Over the past month, starting around June 19, the German state of Saxony began moving Bitcoin from wallets associated with the German Federal Criminal Police Office (BKA) for sale. The BKA legally seized nearly 50,000 Bitcoins (about $2.12 billion) from the operators of the movie piracy website Movie2k.to, which was active in 2013.

The BKA received the bitcoins in mid-January after the suspects "voluntarily transferred the money". Since they began withdrawing bitcoins from their wallets, their bitcoin holdings have dropped to 6,894 bitcoins as of 17:00 (UTC+8) on July 12. (PANews Note: The address has been sold off and holds 0.005 BTC)

Bitcoin prices have fallen about 11% since the outflow of funds.

So, is Germany responsible for the price drop? The answer is no, at least not directly. Here is a detailed explanation:

Analyze trading hours and price movements

To get a better idea of ​​the situation, let's look at the trading hours and monthly price declines over the past few months. Here the chart is divided into European, Asian and US trading hours. The working hours are:

• US: 8am-8pm EST (13:00-01:00 UTC)

• Europe: 8am to 8pm CET (7am to 7pm UTC)

• Asia: 8am to 8pm China Standard Time (00:00-12:00 UTC)

Although the decline occurred during European trading hours, it was more pronounced during U.S. trading hours. In particular, the month-on-month decline over the past five days occurred primarily during Asian trading hours. This suggests that the German sell-off was not directly responsible for most of the price decline, as German government officials may not sell their Bitcoin holdings overnight.

It is worth noting that wallet flow data also proves this “fact”.

Wallet traffic data

Wallet flow data provides further insights. German authorities do not appear to be selling their Bitcoin holdings over the counter, but appear to be active on exchanges. This has the benefit of allowing for further investigation of their behavior.

This article observes outflows from wallets during the day (Europe), and inflows into wallets around 6-8 pm (UTC time, i.e. German evening time).

Why do they do this? It seems that limit sell orders are set during the day, and when the officials go home at night, they close and withdraw all outstanding limit orders and transfer the remaining Bitcoin back to the wallet. This may be for security reasons, as they do not want to leave a large amount of Bitcoin on the exchange overnight (at least they seem to understand the phrase "not your keys, not your coins!").

Impact on the market

The direct impact of the German authorities' Bitcoin sales appears small relative to the overall market. Even on days with large outflows, such as June 8, when about $740 million (about 123,600 Bitcoins) flowed out, this amount is small compared to overall market liquidity. According to Messari data, actual trading volume is usually between $10 billion and $35 billion. Overall, the liquidity of the Bitcoin market is strong.

It is more likely that the bearish narrative played a big role in Bitcoin’s recent decline. The sell-off surrounding Germany and the news that Mt. Gox will pay out to creditors may have prompted people to sell Bitcoin.

in conclusion

In summary, while the German government’s actions have had some impact, they are not the primary cause of the recent price drop (at least not directly). The impact on Bitcoin’s price action is more indirect, with narrative and sentiment playing a larger role.

The latest data shows that the German state of Saxony has sold all 50,000 bitcoins. Will this month go down in history as Bitcoin Pizza Day? Maybe it will be called Bitcoin Keine Ahnung (BKA).

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