Markets
Bitcoin (BTC) Price Drop Due to Germany, Mt. Gox, Miner Selling Pressure May Be Overblown: NYDIG
The argument that the above catalysts are behind the major price decline has been overblown, Greg Cipolaro, research director at NYDIG, said in a note published Wednesday.
“While emotions and psychology may prevail in the short term, our analysis suggests that the price impact of a potential sale may be overblown,” he writes.
“We are not oblivious to the fact that other factors may be at play here, but it is reasonable to think that the rational investor may find this an interesting opportunity created by irrational fears,” he added.
In recent weeks, investors have been fixated on transfers related to Bitcoin addresses linked to the estate of the defunct exchange Mt. Gox, the U.S. government and the German state of Saxony, sparking fears that the more than $20 billion in reserves held by the three entities combined could be sold off.
Even if all three sold all of their assets — about 375,000 BTC as of June 9 — at the same time, Cipolaro found that the decline in BTC’s price in recent weeks was deeper than it would have been for stocks based on Bloomberg’s transaction cost analysis (TCA) — a well-followed metric long used in traditional markets to estimate the price impact of block sales of common stocks.
Cipolaro also argued that recent reports of miners capitulating and selling their BTC stash en masse after this year’s halving event have not only been exaggerated, but in some cases completely inaccurate.
NYDIG data showed that publicly traded mining companies actually increased their bitcoin holdings in June. And while the amount of BTC sales increased slightly last month, it remains well below the levels seen earlier this year and last year.
Cipolaro cautioned against relying on blockchain data about miners moving assets without knowing the nature of those transactions. “Identifying that bitcoins are moving to an exchange or an OTC desk, even if done correctly, only tells us that the coins moved. That’s it,” he said. “They could have been deposited as collateral or lent, not necessarily sold.”