Empire Newsletter: Germany may now be over half-way done selling bitcoin

Plus, what can crypto be optimistic about right now?


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Backup to Nakamoto Plaza!

In Die Hard, East German criminal mastermind Hans Gruber took over Nakatomi Plaza in a plot to steal over half a billion dollars in bearer bonds — worth $1.7 billion in today’s money.

Now, three and a half decades later, Germany is back, holding all of our attention hostage while it liquidates billions in bitcoin.

The bitcoin — nearly 50,000 BTC ($2.86 billion) — was seized earlier this year from the operator of Movie2k, the defunct piracy portal that shut down in 2013. 

Earlier this morning, addresses linked to the Bundesregierung altogether transferred 6,306 BTC ($361.3 million) to Kraken’s exchange, market maker Cumberland DRW and two other entities that appear to be connected to over-the-counter trading desks or other similar platforms.

Meanwhile, on Monday, the same addresses directed an eye-watering 16,038 BTC ($920 million) to Kraken, Cumberland DRW, and other trading platforms including Bitstamp, Flow Traders and Coinbase. 

Overall, Germany has sent over $2 billion in bitcoin to trading platforms since June 16, per Arkham Intelligence data, including unidentified addresses assumed to be OTC desks,

The simplest explanation for those transfers is that the government is selling the seized bitcoin, as the US government does from time to time

But Germany’s wallets have also received bitcoin back from the trading platforms, totaling $508.6 million, valued at each time of transfer.

Purple plus signs are exchange deposits, green diamonds are inflows back to Germany’s wallets

Take yesterday: Of the $920 million in bitcoin sent to trading platforms, about 15% of it was directed to Bitstamp, equal to around $134 million. 

Earlier this morning — two hours before Germany’s latest round of exchange transfers — government wallets received 1,692 BTC ($97 million) back from Bitstamp. Chunks of bitcoin have also been returned from Kraken, Coinbase and miscellaneous apparent OTC desks.

It’s unclear why Germany’s wallets follow these patterns, but perhaps most importantly, the outflows far outweigh the inflows to date.

If we surmise that any bitcoin that hasn’t made it back to German wallets has more than likely been sold for fiat, then Germany is so far more than halfway through liquidating Movie2k’s bitcoin.

A broad estimation suggests Germany may have generated up to $1.54 billion from 27,014 BTC, with an implied price of $56,800 per coin — 1% below its current trade price. US authorities sent a separate $241.2 million to Coinbase at the end of June.

Germany is still holding 22,846 BTC ($1.31 billion), which is definitely a lot of money. (For scale, CoinGecko reports about $32 billion in global daily bitcoin volume right now).

Mt. Gox and the US government still have a long way to go

As with big spectacle liquidations like these, it’s difficult to say which has the bigger market impact: the actual sales or the chatter surrounding them. 

The answer doesn’t really matter. The outcome is the same. What does matter is that Germany could turn out to be the least threatening bitcoin villain over the short term.

Mt. Gox still has over five times more bitcoin to distribute to creditors over the next few months, and directly to crypto exchanges, no less. 

The US government, meanwhile, is sitting on even more seized bitcoin — over 50% more than Mt. Gox’s remaining stash — equal to $12.67 billion. 

Yippee ki‐yay, bitcoin stacker.

— David Canellis

Data Center

  • The UK government also has its own seized bitcoin stash: 61,245 BTC ($3.52 billion). It hasn’t yet transferred any of it.
  • BTC open interest is down almost 25% over the past month, now at $27.63 billion.
  • Weekly DEX volumes are up 45% to $44.4 billion, led by Solana’s Raydium with 13.5% of the total, per DeFiLlama.
  • Restaking protocol Karak’s TVL is looking to reclaim the $1 billion mark, after falling under $800 million earlier this month. 
  • Rival EigenLayer has shed over $5 billion TVL over the past month. ETH’s falling price is only partly to blame, with stakers overall pulling 6% of ETH locked in the protocol.

Must keep swimming

I’m losing at 2024 bingo, if we’re being honest.

So far this year, there have been a few things that I didn’t think to include in my expectations, such as crypto becoming an election topic (and part of the Republican party platform, ICYMI) and, well, the German government suddenly deciding to offload its bitcoin stash.

Let’s focus on the latter since we’ve seen a whole lot of transfers in the last couple of days, and some investors seem spooked. 

I called up Ledn’s John Glover to check in on the two levels he gave us a few weeks ago ($55,000 to $56,000 and $49,000, respectively) in light of the German government’s lack of diamond hands.

“I mean, that was a significant amount of bitcoin that they supposedly sold in the last 24 to 48 hours. Interesting to me that they’re doing it. But you know, when you look at every government being cash-strapped, it’s not really surprising,” he said. 

In total, he estimates that $25 billion worth of bitcoin has been repossessed by authorities, which is just another overhang to keep in mind because governments will seek to monetize those holdings. 

With roughly $2 billion dollars offloaded so far, Glover’s not too worried though. Given that the market is trading roughly $30 to $40 billion a day in bitcoin alone, that kind of selling can be absorbed, he added. 

In fact, when you’re looking at the chart, you can kind of track where the selling pressure is coming from…. and when the dip’s being bought. For example, the pressure on Sunday night came during the Asia/Europe hours but had bounced back by the time the US was coming online. 

“And that’s what we’ve seen the last couple sell-offs. It’s been a late European, early Asian sell-off, and then the US comes in and starts buying it back,” Glover said.

“So I think there’s the overhang from Mt. Gox in Asia, and then there’s the desire for traditional finance players to add to their portfolios on dips. That kind of makes sense for what’s happening here. It’s just [that figuring out] who’s going to win this battle between the bears and the bulls is a little bit tough.”

Let’s be clear though: The German government’s selling may be a negative catalyst right now, but that’s not impacting Glover’s longer-term thinking. He still thinks we hit $80,000, with the potential to go higher, by the end of the year. 

I’m now hoping nothing too crazy happens to further throw off my bingo card. 

— Katherine Ross

The Works

  • Cboe filed on behalf of the SOL ETF contenders — 21Shares and VanEck — late Monday, adding that it hopes to address “increasing investor interest in Solana.” 
  • DigitalX Limited received the green light from Australia to launch a spot bitcoin ETF.
  • While bitcoin remains dominant, Australian investors are increasingly interested in some memecoins, according to Kraken.
  • Ex-Valkyrie CEO Leah Wald will be taking over as CEO of investment company Cypherpunk. 
  • Hut8 announced it entered into a power-purchase agreement for a West Texas site. 

The Riff

Q: What can crypto be optimistic about right now?

The easy answer is the ETH ETFs (which could come very soon, according to our very own Ben Strack!)

But I’m actually going to say the election. Putting aside the politics of it all, there’s no doubt that a party acknowledging crypto shows how far it has come. And not only could we see bitcoin top new all-time highs, it validates the industry to boot.

Again, I can’t stress enough that I’m not endorsing or signing off on either political party. But I’d be remiss not to see the potential growth for the industry based on the combination of new ETFs and more attention on a national scale. 

— Katherine Ross

That we may be finally ready to put the worst dramas in crypto history to bed, for good.

Mt. Gox repayments should be wrapped up over the next 90 days max. Think of those like a Band-Aid — the sooner the better. The same goes for Germany’s liquidations and whatever else the US wants to sell.

Not to discount the anguish still felt by victims of Terra, Three Arrows, Celsius and FTX.

Anyone financially, spiritually, mentally or emotionally hurt in the fallout surrounding any of those collapses (and the many others around the same time) will still have to deal with that day-to-day. And that sucks.

But if Solana can shed its connection to Sam Bankman-Fried and Alameda Research in the public zeitgeist — to the point that funds are filing for SOL ETFs — then we too can drop even our heaviest baggage.

— David Canellis

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

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