Bitcoin and the overall market seemed to have stabilized after building momentum in the first week of the year that could continue. Unfortunately, the sector appears to be back to square one, with total market capitalization down almost 3% in the past week.
One of the events that may have created such a bearish market climate was the approval of the US Department of Justice (DOJ) plan to release seized Bitcoin assets. Due to the significant size of the coins, there is a general feeling that a market downturn may be on the horizon.
Is there a deterioration in the market situation on the horizon?
In a recent post on Platform X, blockchain analytics platform Glassnode discussed the potential price impact of a significant Bitcoin sell-off by the US Department of Justice. As Bitcoinist reports, the Department of Justice has obtained approval to sell over 69,000 BTC (worth over $6 billion at current market price).
In his own reportGlassnode referred to the significant sales of Bitcoin by governments in the past, starting with the German administration’s sale of 56,000 BTC in July 2024. According to the blockchain company, the market absorbed the downward pressure and the price of Bitcoin rose from $53,000 to $68,000 rather than falling.
Glassnode noted, however, that this was not always the case with Bitcoin’s price whenever significant amounts of BTC were offloaded. In this particular scenario, the on-chain analytics company highlighted two metrics (net exchange flows and net unrealized profit/loss [NUPL]) to gauge how the market will react to a potential sale of the Department of Justice.
Source: Glassnode/X
In particular, Glassnode highlighted the market reaction as the exchange’s 30-day plain moving average (SMA) of inflows reached around 70,000 BTC. For example, when stock inflows reached +70,500 BTC in March 2021, with NUPL at around 0.72 (signaling euphoria/greed), the market experienced a correction before bottoming out a few months later.
In June 2022, an inflow of 68,700 BTC and a NUPL of 0.21 (which means capitulation) caused the market to enter a year-long bear market – triggered by the collapse of LUNA. From the analysis of these indicators, it can be concluded that the impact of a potential sale by the US government on this scale depends on the current state of the market.
Given that market sentiment (based on NUPL) is currently positive/negative, there is a likelihood that the market will be able to absorb potential selling pressure from the US government sell-off. However, it is worth mentioning that investors showing cautious optimism may not be enough to keep the price of Bitcoin stable once significant amounts of coins hit the open market.
Bitcoin price at a glance
At the time of writing, Bitcoin is trading at around $94,700, reflecting an escalate of 2.4% over the last day. This one-day action shows that the leading cryptocurrency may be experiencing a resurgence after terrible weekly performance. According to CoinGecko data, the price of Bitcoin has fallen by almost 4% in the last seven days.
The price of BTC on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView
