In a recent analysisKiarash Hossainpour, founder of Colorways Ventures and The Consensus, warns of a potential shockwave in the bitcoin market and pointed out several major bitcoin holdings that could put significant selling pressure on the market in the first half of 2024.
Potential bitcoin Sellers
First, Hossainpour drew attention to Grayscale bitcoin Trust (GBTC), whose holdings have dropped from 621,000 btc to just under 580,000 btc since the launch of its spot ETF. The trust's high annual fee of 1.5% compared to other providers such as Bitwise (0.2%) and BlackRock (0.25%), as well as Grayscale's track record, are currently causing a massive sell-off, which This is probably due to the current downward trend.
And at the moment there is no end in sight. According to the expert's estimate, there is still a selling pressure of 281,045 btc, that is, about 12 billion dollars.
A notable factor in the potential liquidation is the long-awaited distribution of the infamous Mt. Gox, which could finally release 138,000 btc (valued at $5.8 billion) to creditors in 2024, after a decade in insolvency proceedings. This distribution, expected before the third quarter, could lead to a significant portion of bitcoin being sold for fiat money or distributed “in kind” to creditors.
In addition, the insolvency proceedings of Celsius and FTX add to the possible liquidation. Around 38,000 btc ($1.6 billion) of Celsius and approximately 20,500 btc ($850 million) of FTX are set for liquidation plans and expected distributions throughout the first half of 2024, which could convert these holdings in dollars.
bitcoin miners, particularly in the US, are estimated to have around 32,000 btc ($1.35 billion), accumulated ahead of the next bitcoin halving event in mid-April. A portion of these holdings are expected to be sold in 2024. However, this figure represents only publicly reported figures by US miners, and actual global mining holdings could be significantly higher.
Additionally, the US government's strategy with bitcoin seizure is a critical component of this forecast. From 2020 to 2022, authorities seized 207,189 btc from cases related to Silk Road, Jimmy Zhong, and Bitfinex hackers. While only a small fraction of these bitcoin have been sold, the US government typically sells these btc periodically in batches.
Last year, US lawyers said they intended to sell the rest of Silk Road's 41,491 btc in four lots. However, only one batch was processed, when the US Department of Justice sent 8,200 btc ($252 million at the time) to Coinbase in July. It is not confirmed whether further sales occurred.
In total, the bitcoin holdings of the aforementioned entities amount to more than 716,000 btc. Even if not all holdings are sold this year, which is unlikely, especially in the case of the US government, there is potentially enormous selling pressure that the market will have to absorb.
Hossainpour also emphasized that although these potential sales represent a significant amount of btc entering the market, the impact could be mitigated by the different timelines and strategies of each seller. He concluded: “Overall, a wide range of selling pressures affect bitcoin. It is important to note that each of these vendors has their own schedule, not everything happens at the same time, which significantly reduces the impact.”
At the time of publication, btc was trading at $40,860.
Featured image from Shutterstock, chart from TradingView.com
