Bitcoin and the general market seemed to have steadied their ship after garnering 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 declining by nearly 3% in the last week.
One of the events that might have precipitated such a bearish climate in the market was the approval of the United States Department of Justice (DOJ)’s plan to offload seized Bitcoin assets. Due to the significant size of the coins, there is a general sense that a market downturn might be on the horizon.
In a recent post on the X platform, blockchain analytics platform Glassnode discussed the potential impact of a significant Bitcoin sell-off by the US DOJ on price. As Bitcoinist reported, the Department of Justice has been cleared to sell over 69,000 BTC (worth over $6 billion at current market price).
In its report, Glassnode referred to substantial Bitcoin sales by governments in the past, starting with the German administration’s sale of 56,000 BTC in July 2024. According to the blockchain firm, the market absorbed the downward pressure, with the Bitcoin price jumping from $53,000 to $68,000 rather than slumping.
Glassnode, however, noted that this wasn’t always the case for the Bitcoin price whenever significant amounts of BTC were offloaded. In this particular scenario, the on-chain analytics firm highlighted two metrics (exchange netflows and net unrealized profit/loss [NUPL]) to measure how the market will 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 the exchange inflows reached around 70,000 BTC. For instance, when the exchange inflows reached +70,500 BTC in March 2021, with the NUPL at around 0.72 (signaling euphoria/greed), the market experienced a correction before recovering months later.
In June 2022, exchange inflows of 68,700 BTC and a NUPL of 0.21 (indicating capitulation) saw the market enter into a year-long bear market — triggered by LUNA’s collapse. From the analysis of these metrics, it can be deduced that the impact of a potential US government sale of that scale depends on the current state of the market.
With the market sentiment (based on NUPL) currently in belief/denial, there is a likelihood that the market might be able to absorb the potential sell-side pressure from a US government sell-off. However, it is worth mentioning that investors showing cautious optimism might not be enough to keep the Bitcoin price afloat when significant amounts of coins hit the open market.
As of this writing, the price of Bitcoin stands at around $94,700, reflecting a 2.4% increase in the past day. This single-day action shows that the premier cryptocurrency could be undergoing a resurgence after a horrendous weekly performance. According to CoinGecko data, the Bitcoin price is down by nearly 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
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