In a recent analysis, Kiarash Hossainpour, founder of Colorways Ventures and The Consensus, warns of a potential shockwave in the Bitcoin market and pointed to several significant Bitcoin holdings that could exert significant selling pressure on the market in the first half of 2024.
Potential Bitcoin Sellers
First, Hossainpour drew attention to the Grayscale Bitcoin Trust (GBTC), which has seen its holdings reduce from 621,000 BTC to just under 580,000 BTC since the launch of their 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 history are currently causing a massive sell-off, which is probably responsible for the current downward trend.
And there is no end in sight for the time being. According to the expert’s estimate, there is still selling pressure of 281,045 BTC, in other words around $12 billion.
A notable factor in the potential sell-off is the long-awaited distribution from the infamous Mt. Gox, which might finally release 138,000 BTC (valued at $5.8 billion) to creditors in 2024, following a decade in insolvency proceedings. This distribution, expected before Q3, could lead to a significant portion of Bitcoin being sold for fiat or distributed ‘in-kind’ to creditors.
Furthermore, the insolvency proceedings of Celsius and FTX add to the potential sell-off. About 38,000 BTC ($1.6 billion) from Celsius and approximately 20,500 BTC ($850 million) from FTX are poised for liquidation plans and distributions expected throughout the first half of 2024, potentially converting these holdings into dollars.
Bitcoin miners, particularly in the US, are estimated to be holding around 32,000 BTC ($1.35 billion), accumulated ahead of the next Bitcoin Halving event in mid-April. It’s expected that a portion of these holdings will be sold in 2024. However, this figure represents only publicly reported numbers from US miners, and the actual global miner holdings might be significantly larger.
Additionally, the US government’s strategy with seized Bitcoin is a critical component of this forecast. From 2020 to 2022, authorities seized 207,189 BTC from cases tied to the Silk Road, Jimmy Zhong, and the Bitfinex hackers. While only a small fraction of these Bitcoin has been sold, the US government typically sells these BTC periodically in batches.
Last year, US attorneys said they intended to sell the rest of Silk Road’s 41,491 BTC in four batches. However, only one batch has been processed, when the US Department of Justice sent 8,200 BTC ($252 million then) to Coinbase in July. Whether further sales took place is unconfirmed.
In total, the Bitcoin holdings of the aforementioned entities amount to over 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 huge selling pressure that the market will have to absorb.
Hossainpour also emphasized that although these potential sell-offs represent a significant amount of BTC entering the market, the impact might be mitigated by the differing timelines and strategies of each seller. He concluded, “Overall, a wide range of selling pressure hitting Bitcoin. It’s important to note that each of these sellers has their own timeline, it doesn’t all happen at once, which significantly reduces the impact.”
At press time, BTC traded at $40,860.
Featured image from Shutterstock, chart from TradingView.com