The third quarter of 2024 has been tumultuous for the crypto market, with significant selling pressures and regulatory uncertainties affecting bitcoin and other digital assets. Coinbase Institutional reports that indiscriminate selling by the German government and the Mt Gox Rehabilitation Trust repayments have contributed to market volatility.
Coinbase Institutional Highlights Bitcoin Sales Impact on Crypto Market
In the report, Coinbase Institutional said that the German government’s Bundeskriminalamt (BKA) began selling seized bitcoin in mid-June, creating supply overhangs and unsettling the market. The BTC originally stemmed from the operators of Movie2k.to, a now-defunct piracy website. Although the daily sales, averaging $85 million, were not large relative to the $10.6 billion daily bitcoin spot volumes, the manner of selling put downward pressure on bitcoin prices.
Coinbase Institutional notes that with BKA’s bitcoin holdings significantly reduced, some of the market distortions might soon dissipate.
“The BKA may be almost done after it reduced its holdings from around 50k BTC ($3.55B) in mid-June to less than 5k BTC ($285M), as of July 11,” Coinbase wrote. “That suggests some of these market distortions should dissipate soon, in our view.” According to Arkham Intelligence data, Coinbase was also one of the exchange counterparties the BKA interacted with over the past few weeks.
Additionally, Coinbase Institutional wrote that the repayments from the Mt Gox Rehabilitation Trust, which started in early July, have introduced further uncertainty. The approved exchanges for processing these repayments have varying timelines, which adds to market unpredictability. Coinbase Institutional believes that while some creditors may hedge their positions, any actual selling of repaid bitcoin is likely to be gradual and orderly, minimizing its market impact.
“Moreover, we would expect any selling that does take place to be gradual and orderly, putting only a moderate impact on markets,” Coinbase’s report details.
Coinbase Report Notes U.S. Economy Uncertain Amid Recession Worries
Looking ahead, Coinbase Institutional highlighted potential macroeconomic challenges, noting concerns about a possible U.S. recession. “Lately, we’ve been seeing more reports citing concern that the U.S. could fall into a recession later this year or in early 2025,” the report explains. Coinbase Institutional insists “the macro data has given a lot of evidence that the U.S. economy has slowed down (ISM manufacturing, unemployment, domestic demand, etc).”
Despite acknowledging signs of a slowing U.S. economy, Coinbase Institutional anticipates that interest rate cuts by the Federal Reserve could unlock liquidity, boosting both stock and crypto markets. Overall, they foresee continued volatility in the crypto market in the short term but expect conditions to improve by late September.
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