Emily Walker
Bitcoin and the overall market managed to stabilize after gaining some traction in the first week of the year. However, the industry seems to have reverted to its previous state, with total market capitalization dropping by almost 3% over the past week.
A possible factor contributing to this negative trend is the United States Department of Justice (DOJ) receiving approval to sell seized Bitcoin assets. The volume of these coins raises concerns that a market downturn may be imminent.
Are We Facing a Market Downturn?
A recent analysis from Glassnode, a blockchain analytics platform, highlighted the possible effects of a large Bitcoin liquidation by the US DOJ on prices. As reported by Bitrabo, the DOJ has been authorized to dispose of more than 69,000 BTC, valued at over $6 billion at the current price.
Glassnode’s report referenced previous government sales of Bitcoin, such as the German government’s sale of 56,000 BTC in July 2024. They noted that the market absorbed similar sell-offs, leading to a price increase from $53,000 to $68,000 instead of a drop.
However, Glassnode cautioned that not every significant BTC offloading has resulted in a price increase. The analytics firm examined two indicators—exchange netflows and net unrealized profit/loss (NUPL)—to predict market reactions to a potential DOJ sell-off.
Specifically, they pointed out that when the 30-day simple moving average (SMA) of exchange inflows hits around 70,000 BTC, it can influence market behavior. For example, in March 2021, when inflows hit 70,500 BTC alongside a NUPL of 0.72 (indicating euphoria), the market underwent a correction before rebounding later. In contrast, June 2022 saw inflows of 68,700 BTC and a NUPL of 0.21 (indicating capitulation), which initiated a lengthy bear market following the LUNA collapse. This analysis suggests that the possible impact of a major government sale depends heavily on the current market conditions.
Given that the prevailing market sentiment (based on NUPL) is currently in a belief/denial phase, there is a potential for the market to handle the pressure from a government sell-off. However, it is crucial to note that even cautious optimism among investors might not be sufficient to sustain Bitcoin’s value amidst a large influx of coins into the market.
Current Bitcoin Price Overview
Currently, Bitcoin is priced at approximately $94,700, which indicates a 2.4% rise in the last day. This daily movement suggests that the leading cryptocurrency may be experiencing a recovery after a tough week. Data from CoinGecko shows that Bitcoin’s price has decreased by nearly 4% over the past week.