Bitcoin Price Drops $33 Billion as US, China, UK, and Ukraine Hold Crypto

A recent analysis by research company Kaiko highlighted potential sources of Bitcoin disposals, pointing to countries like the US, China, the UK, and Ukraine, as well as creditors of the collapsed Mt. Gox exchange. The report suggests a looming $33 billion overhang of Bitcoin supply in the market.

According to Kaiko’s estimates, the US government holds approximately 203,220 Bitcoin, with China following closely at 190,000, the UK at 61,200, and Ukraine at 46,350. Governments often acquire tokens in criminal cases, while Ukraine is believed to have received donations to support its defense against Russia. Additionally, Mt. Gox still has around 46,170 tokens awaiting distribution.

Addressing the prevalent topic of supply overhang in crypto markets, Kaiko analysts Adam Morgan McCarthy and Dessislava Aubert noted the presence of significant holders who could potentially exert selling pressure in the upcoming months.

Concerns about substantial sell orders coincide with a decrease in liquidity within the Bitcoin market, which can magnify price fluctuations in response to large trades. Bitcoin has experienced an 8% decline this month amidst dwindling liquidity, in contrast to the modest gains seen in global stocks and bonds.

Sean Farrell, head of digital-asset strategy at Fundstrat Global Advisors LLC, highlighted the subdued spot market volumes for Bitcoin, contributing to recent price volatility. He anticipates increased activity post the US Labor Day holiday, citing seasonal trends.

Farrell pointed out a decline in the seven-day average of Bitcoin turnover, indicating a shift from around 5% to 2% post the digital asset’s record rally in March. Despite inflows into US spot-Bitcoin exchange-traded funds and expectations of Federal Reserve policy adjustments, Bitcoin faced challenges in August.

In the US Bitcoin ETF sector, JPMorgan Chase & Co. strategists noted a challenging trading environment based on the Hui-Heubel ratio, signaling deteriorating liquidity over the past six months. The combined daily trading volume for US Bitcoin ETFs has plummeted to under $2 billion from a peak exceeding $10 billion in March.

As of Friday morning in London, Bitcoin traded at $59,535, a notable distance from its March peak. Other tokens like Ether and Solana displayed mixed performance in the market.