Institutions sold 230,000 Bitcoins in the past two months: Who is selling and why?

236,237, which is the known large institutional BTC sell-off since May 10. Most of the sell-offs were forced sell-offs, a few were not, and we have done a brief post-mortem analysis of the selling pressure and ripple effects over the past two months.

The 236,237 BTC figure comes from the massive institutional liquidations and other large-scale selling we’ve seen during the market stress over the past two months. This figure does not take into account other unforced selling and hedging activity, which typically occurs during crypto bear markets.

It all started with Do Kwon and LFG

Within 5 days after LFG reached its initial $3 billion BTC reserve target, the UST/USD exchange rate fell into chaos. In order to save UST from depegging, LFG used 80,000 BTC reserves.

The collapse of Luna and UST led to more selling in the coming months.

Miner selling first seen in May

As the market situation deteriorated, listed miners were forced to start selling their BTC in May.

In May, listed BTC miners sold a total of 4,456 BTC.

Tesla

During this time, Tesla sold 75% of its Bitcoin . We estimate Tesla's sales volume to be 29,060 BTC at an average price of $32,209.

This estimate is based on previous VWAP estimates from their initial purchase of BTC (average price of $34,841) and selling 10% of BTC in Q1 2021 to “test liquidity.”

Assuming that 10% of the BTC sold in the first quarter was at a price of $50,000, Tesla's new BTC cost price was approximately $33,325, which means that Tesla sold at a small loss.

CPI surprises

Entering June 10, the US CPI unexpectedly fell. The related factors caused prices to fall, bankrupting several whales that were already under pressure after the Luna collapse.

On June 12, Celsius halted withdrawals and rumors of 3AC’s collapse circulated. Leaked court documents revealed that 3AC owed lenders 18,193 BTC and the equivalent of £22,054 in GBTC.

After bankruptcy, 3AC’s creditors hedged and de-risked their exposures while liquidating 3AC in an attempt to repair the holes in the balance sheet, triggering a reasonable fire sale.

Purpose Liquidation

In a chain reaction to Luna, 3AC, and Celsius, the Canadian Purpose ETF saw a massive redemption of 24,510 BTC, creating further selling pressure in the market.

Miner selling intensified in June

The market became bleaker, and the small-scale selling pressure from BTC miners in May became larger in June. In June, listed BTC miners sold 14,600 BTC.

Celsius bankruptcy reorganization

Celsius, which is preparing to file for Chapter 11 bankruptcy protection, repaid DeFi’s loans, releasing 21,962 WBTC in early July.

In addition to WBTC, Celsius also has a large amount of stETH, and the company was rumored to have been acquired by Alameda at a 15% discount in June this year.

Alameda may have hedged their stETH exposure, causing a surge in ETH selling, while putting temporary and brutal downward pressure on ETH, affecting the broader cryptocurrency market.

The Problem with Macro On-Chain Metrics

In late April, I attempted to challenge the view of certain macro on-chain indicators. Most of the selling pressure since May has come from decentralized exchanges and sources I mentioned in my research on “The impact that productization of BTC may have on the market”.

What stage are we in now?

The past two months have been a clear institutional capitulation phase. Most of the 236,237 BTC sold above was forced selling, and was likely worse than estimated in this research report.

Chapter 11, 3AC court filings, normalization of stETH/ETH prices, and the relief rally seen over the past few weeks tell me that the ripple effects are being contained and the uncertain times ahead are behind us.

Liquidation is temporarily over

I tend to think that the phase of forced selling and uncertainty with cascading liquidations is over for now and the market will normalize.

We may continue to see declines and sell-offs in a volatile environment for some time to come, while macro and correlations may return as key forces in the market.