Saxony fuels Bitcoin crash

The Bitcoin seems to know only one direction: down. The cryptocurrency has significantly moved away from its all-time high.

Bitcoin’s relentless slide in one direction—down—seems to be showing no signs of stopping. The cryptocurrency has fallen drastically from its all-time high and continues to lose value at the start of the week, having dropped nearly 20% since early June. From the March record high of around 73,800 US-Dollars, the Bitcoin has now slipped to around 55,700 Dollars. And one major reason for the slide: Saxony.

During investigations into the illegal movie streaming platform Movie2k.to, Saxony’s Criminal Police Office seized around 50,000 Bitcoins in January. One suspect voluntarily transferred the digital coins, the General Prosecutor’s Office Dresden announced. The assets are now being sold by the authorities. Given the current value, the volume is significant – around 2.6 billion Euros.

Sales in such large quantities could lead to an oversupply and put further pressure on the price. Moreover, law enforcement agencies in Europe and the US are also said to be sitting on large Bitcoin holdings seized from criminals, which they intend to sell.

‘Panic mode’

But pressure on the cryptocurrency is also coming from another direction. A decade ago, the once largest Bitcoin exchange Mt. Gox collapsed, losing around 850,000 Bitcoins. Of these, 142,000 have now been recovered and are to be returned to their owners.

It’s unclear what these investors will do with their Bitcoins. At the time of the bankruptcy, the cryptocurrency was only worth a few hundred dollars. So it’s quite possible that at least some investors will be throwing their Bitcoins onto the market in large quantities. "Should crypto assets be thrown onto the market in significant volumes in the foreseeable future, this could lead to a supply surplus, at least temporarily," says Timo Emden from Emden Research. "The transfers of Bitcoin to the old owners alone are already sufficient to cause investors to panic."

The continuous selling of seized Bitcoins by authorities and potential massive sales from early Mt. Gox investors could oversupply the Bitcoin market, putting additional pressure on its price and potentially sparking panic among investors. The large volume of Bitcoin sales could create a temporary oversupply, further impacting the crypto economy.