The United States Department of Justice (DoJ) is set to offload 69,000 Bitcoins (BTC), worth over $6 billion. According to Glassnode, this development has raised concerns about its potential impact on the cryptocurrency market.
While large Bitcoin sell-offs have previously caused uncertainty, the market’s response remains unpredictable.
Comparing Past Bitcoin Liquidations
Glassnode compared this planned liquidation to similar events in the past. For instance, in July 2022, the German government sold 56,000 BTC. Despite concerns about destabilization, the market absorbed the pressure and rallied. Following the sale, Bitcoin’s price surged from $53,000 to nearly $68,000, showcasing resilience under favorable conditions.
Market analysts are now examining Bitcoin’s 30-day simple moving average of exchange netflows. This metric helps gauge sell-side pressure, providing insights into how the market might respond.
Historical Patterns of Market Response
In March 2021, Bitcoin experienced net inflows of 70.5K BTC during a period of market euphoria. At the time, the Net Unrealized Profit/Loss (NUPL) metric stood at 0.72. However, the market corrected soon after, eventually rebounding.
Conversely, in June 2022, 68.7K BTC inflows coincided with a capitulation phase following the LUNA collapse. NUPL fell to 0.21, igniting a prolonged bearish trend.
Liquidity and Sentiment: Key Factors
Glassnode notes that the DoJ’s Bitcoin sale highlights the importance of liquidity and market sentiment. How the market absorbs this large-scale liquidation will depend on these two critical factors. If liquidity remains strong and sentiment positive, Bitcoin could demonstrate resilience once again. However, adverse conditions may lead to heightened volatility.
