German Government’s Bitcoin Holdings Disconcerting for Investors

Thanks to a massive seizure that occurred as part of a criminal investigation by German authorities earlier this year, the German Federal Criminal Police Office (known as BKA) is in possession of more than 23,000 BTC, valued at well over $1 billion. In and of itself this is not a major news story as police agencies the world over are seizing Bitcoin and other crypto assets every day of the week. What makes this a major story though is the impacts the German government’s disposal of this crypto is having on the global crypto market and the ramifications of other similarly sized liquidations of crypto assets.

Bitcoin Originated from January 2024 Seizure of Movie2k Assets

Shortly after the beginning of the year, a years-long investigation conducted by German authorities reached its conclusion. The investigation, which dates back to 2013, targeted a site notorious for illegally streaming all sorts of copyrighted content, namely movies and television programs. Though Movie2k has not been operational for years, the investigation into the funds earned from the illegal operation has been an arduous one. Finally though, and thanks to the transfer of roughly 50,000 Bitcoin from the owners of a wallet connected to the illegal streaming site Movie2k to a wallet owned by German authorities, the investigation into the streaming platform has finally reached an end.

The issue for German authorities became what they should do with the more than $2 billion in seized BTC, and the obvious answer is that it should be sold. Selling Bitcoin is exactly what the BKA has been doing over the last few months, and with disastrous effect in the eyes of many crypto investors. You see, whenever the market is flooded with BTC sales, the value of Bitcoin (and other assets) can be diluted dramatically, even if only for a short period of time. During the latter stages of June and the early parts of July that is exactly what has happened as many cryptocurrencies have seen their value fall to their lowest points in over a year. On top of all of this, the German government still has about half of the seized Bitcoin to sell which means that the turbulent environment crypto is currently faced with may extend through the summer.

Does Too Much Ownership Defeat the Point of Bitcoin?

From the earliest days of Bitcoin’s existence, two of the most attractive features of the cryptocurrency were the fact that its supply is limited and that it is not centrally controlled the same way the US Dollar is controlled by the US Federal Reserve. In the early days this was something that a lot of people put a lot of trust into. More recently however, as the circulating supply of Bitcoin has grown to tens of millions there are growing concerns about the possibility of a single entity, namely a government, owning enough of the crypto to exert real influence over its pricing and distribution.

The German government is actively attempting to get rid of the Bitcoin they are holding, but this whole situation is uneasy for some investors because it offers a small glimpse into what can happen if too much Bitcoin is held by one single entity, or small group of entities. What can be done to prevent this from happening is anyone’s guess, and the public ledger certainly helps inspire confidence in the system as a whole, but it underlines a trend of people beginning to doubt the foolproofness of Bitcoin and cryptocurrencies as a whole.