The U.S. Department of Justice (DOJ) has received clearance to sell off 69,000 BTC worth $6 billion seized from Silk Road, a defunct platform that allowed users to buy and sell anonymously on the dark web using cryptocurrencies.
Crypto on-chain analytics firm Glassnode on January 10 shared its opinion on what investors and crypto enthusiasts may expect after the huge potential sell-off.
According to the data shared, the sell-off will likely cause a bearish trend to set in, but how quickly the market recovers depends on the prevailing investor sentiment as previous massive sell-offs show.
Two scenarios from the past
Glassnode shared two scenarios in the past in which similar huge Bitcoin sell-offs happened. The first was in 2021 when there was an inflow of 70,500 BTC to exchanges.
This led to a correction as expected, but since the market was in a euphoria with the predominant sentiment being greed, the price rebound in a few months.
The second scenario was in 2022, with an inflow of 68,700 BTC which also caused a correction but because the market was in capitulation, this initiated a year-long bear market which was fueled by the collapse of Do Kwon’s LUNA crash.
This means that if the DOJ sells the 69,000 BTC it has received clearance for, one of these scenarios may play out, depending on the prevailing sentiment at the time of the sale.
What could happen now
It isn’t certain when the DOJ will offload the Bitcoin, but if it does so now, the market is likely to feel the impact in a negative way, considering that short-term holders are currently in capitulation.
This means the 2022 prolonged bear market scenario is likely to play out, but there’s one other rare possibility — the market may absorb the shock and use it as fuel, such as the case when Germany sold 56,000 BTC in July last year.
What do you think?
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