Here’s How Bitcoin Price Could React To Potential US DOJ Sell-Off, Blockchain Firm Explains

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Bitcoin and the broader market appear to have found some stability following an initial surge in the first week of January, potentially setting the stage for further growth. Regrettably, the crypto market seems to be back at square one, as the total market capitalization has dropped by almost 3% over the last seven days.

A possible factor contributing to the pessimistic atmosphere in the market could have been the U.S. Department of Justice (DOJ) deciding to sell their confiscated Bitcoin assets. Given the large quantity of these coins, there’s a widespread feeling that a market decline may be imminent.

Is A Market Downturn On The Horizon?

In their latest update on the X platform, Glassnode, a blockchain analysis firm, explored the possible effects on Bitcoin’s price if the US Department of Justice were to liquidate its substantial Bitcoin holdings (approximately 69,000 BTC, currently valued at over $6 billion). As Bitcoinist news outlet shared, this massive sale is authorized by the DOJ.

Glassnode’s report mentions that governments have previously sold significant amounts of Bitcoin, such as when the German government sold 56,000 BTC in July 2024. However, contrary to expectations, the market did not collapse under the selling pressure. Instead, the price of Bitcoin skyrocketed from $53,000 to an impressive $68,000.

Glassnode pointed out that not every time large amounts of Bitcoin were sold did it impact the Bitcoin price in the same way. In this specific instance, they emphasized two key indicators (exchange net flows and Net Unrealized Profit/Loss or NUPL) to predict how the market might respond to a possible DOJ sale.

As a researcher delving into Bitcoin market trends, I’ve noticed that Glassnode’s insights are particularly insightful when discussing the market’s reactions to the 30-day simple moving average (SMA) of exchange inflows approaching approximately 70,000 BTC. For example, in March 2021, when exchange inflows surged to +70,500 BTC, accompanied by a Network Upvalued Realized Price (NUPL) of around 0.72 (indicating euphoria/greed), the market experienced a correction before eventually recovering several months later.

In June 2022, the Bitcoin market experienced an influx of 68,700 BTC and a NUPL of 0.21, which suggested a period of selling-off or “capitulation.” Consequently, this led to a prolonged bear market that lasted for over a year. The market’s current condition will determine the extent of influence if there is a potential large-scale sale by the US government.

Given the present outlook (based on NUPL) indicating a mix of faith and skepticism, there’s a possibility that the market could withstand the potential selling pressure from a U.S. government sell-off. Nonetheless, it’s important to note that while investors exhibit cautious enthusiasm, it may not be sufficient to maintain Bitcoin prices when substantial amounts of coins are released into the open market.

Bitcoin Price At A Glance

Currently, the cost of a Bitcoin is approximately $94,700, signifying a 2.4% rise over the past day. This daily uptick suggests that the leading cryptocurrency might be experiencing a recovery following a disappointing weekly trend. Based on data from CoinGecko, the price of Bitcoin has decreased by nearly 4% in the last week.

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2025-01-11 17:13