Bitcoin has seen a 15% drop over the last month, causing market observers to attribute the decline to selling pressure from bitcoin mining operators, Mt. Gox refunds, and actions by the German state of Saxony. However, according to Greg Cipolaro, head of research at NYDIG, the impact of these factors has been overstated. In a note released Wednesday, Cipolaro stated, “While emotions and psychology may rule over the short-term, our analysis suggests that the price impact from potential selling may be overblown.”
He continued, “We aren’t 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.”
Recent weeks have seen investors concerned about transfers linked to Bitcoin addresses associated with the defunct exchange Mt. Gox, the U.S. government, and the German state of Saxony. These concerns arose from fears of imminent sales amounting to over $20 billion worth of Bitcoin held by these entities.
Even if all three were to sell their assets simultaneously—a sum of roughly 375,000 BTC as of June 9—Cipolaro found that the BTC price decline over the past weeks was more severe than it would have been for stocks, based on Bloomberg’s transaction cost analysis (TCA). This is a long-established indicator used in traditional markets to estimate the price impact of block sales of common stocks.
Cipolaro further argued that reports of miners capitulating and selling their BTC en masse following this year’s halving event have also been overstated, with some claims being wholly inaccurate. According to NYDIG’s data, publicly listed mining companies actually increased their bitcoin holdings in June. While the amount of BTC sold did increase slightly last month, it still remained below levels seen earlier this year and last year.
Cipolaro advised caution against relying solely on blockchain data about miners moving assets without understanding the nature of those transactions. “Identifying that bitcoins move to an exchange or OTC desk, even if done correctly, only tells us that coins moved. That’s it,” he argued. “They could’ve been posted as collateral or lent out, not necessarily sold.”
