Bitcoin and the broader market appear to have stabilized after gaining some traction in the inaugural week of the year. Regrettably, the industry seems to be back to its initial position, with the overall market capitalization dropping nearly 3% over the last week.
One of the factors that may have contributed to this negative atmosphere in the market was the sanctioning of the United States Department of Justice (DOJ)’s proposal to liquidate seized Bitcoin holdings. Given the considerable volume of the coins, there is a widespread feeling that a market decline could be imminent.
Is A Market Decline Imminent?
In a recent update on the X platform, the blockchain analytics firm Glassnode examined the potential repercussions of a large Bitcoin sell-off by the US DOJ on pricing. As reported by Bitcoinist, the Department of Justice has been authorized to offload over 69,000 BTC (valued at more than $6 billion at present market rates).
In its study, Glassnode referenced notable Bitcoin sales by governments previously, commencing with the German government’s divestment of 56,000 BTC in July 2024. According to the blockchain analytics company, the market managed to absorb the selling pressure, with Bitcoin’s price surging from $53,000 to $68,000 instead of declining.
However, Glassnode pointed out that this was not always the case when significant quantities of BTC were sold. In this specific context, the analytics firm underscored two key indicators (exchange net flows and net unrealized profit/loss [NUPL]) to evaluate how the market might respond to a potential DOJ liquidation.
Source: Glassnode/X
Specifically, Glassnode underscored the market’s reaction when the 30-day simple moving average (SMA) of exchange inflows reached approximately 70,000 BTC. For example, when exchange inflows peaked at +70,500 BTC in March 2021, with the NUPL around 0.72 (indicating euphoria/greed), the market faced a correction prior to bouncing back months later.
In June 2022, inflows of 68,700 BTC along with a NUPL of 0.21 (suggesting capitulation) led the market into a prolonged bear phase— initiated by LUNA’s downfall. Through analyzing these metrics, it can be inferred that the effects of a possible sizable US government sale depend on the market’s current condition.
With current market sentiment (according to NUPL) residing in belief/denial, it is plausible that the market may absorb the possible selling pressure from a US government sale. Nonetheless, it should be noted that investor cautious optimism might not suffice to maintain the Bitcoin price when substantial amounts of coins are released onto the market.
Bitcoin Price Overview
At the time of writing, the price of Bitcoin is approximately $94,700, reflecting a 2.4% increase over the previous day. This single-day movement indicates that the leading cryptocurrency may be experiencing a resurgence following a dismal weekly performance. According to CoinGecko data, the Bitcoin price has declined by nearly 4% over the last seven days.
The price of BTC on the daily chart | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView