NYDIG: Germany, Mt. Gox and miners’ selling pressure caused BTC’s decline to be exaggerated

Bitcoin (BTC) has plunged 15% over the past month, with many market observers blaming selling pressure from bitcoin mining operators, Mt. Gox repayments and, most recently, Germany’s coin sales.

Greg Cipolaro, head of research at NYDIG, said in a note on Wednesday that the aforementioned catalysts were behind the sharp price decline and that such claims were overstated.

“While sentiment and psychology may dominate in the short term, our analysis suggests the impact of a potential sell-off on prices may be exaggerated,” he wrote.

“We’re not unaware that other factors may be at play, but it stands to reason that rational investors might find this to be an interesting opportunity created by irrational fear, ” he added.

In recent weeks, investors have focused on transfers to bitcoin addresses linked to defunct exchange Mt. Gox, the U.S. government and the German state of Saxony, raising concerns that more than $20 billion worth of reserves held by the three entities were about to be sold.

Even if they sold all of their assets at once (roughly 375,000 BTC as of June 9), Cipolaro found that BTC’s price has fallen more over the past few weeks than stocks based on Bloomberg’s Transaction Cost Analysis (TCA), a common metric long used by traditional markets to assess the price impact of large sales of common stocks.

Estimated price impact of block sales compared to stock sales (NYDIG)

Cipolaro also believes that recent reports of miners collectively dumping their BTC reserves following this year’s halving event are not only exaggerated, but in some cases completely inaccurate.

NYDIG data shows that publicly traded mining companies actually increased their Bitcoin holdings in June. While BTC sales recovered slightly last month, they are still well below levels seen earlier this year and last year.

BTC held by public miners (NYDIG)

Cipolaro advises against relying on blockchain data to determine miners are moving assets unless they understand the nature of those transactions. “Even if the bitcoins are correctly identified as being moved to an exchange or OTC desk, it only tells us that the bitcoins were moved. That’s it,” he argued. “They may have been used as collateral or loaned out, not necessarily sold.”