Hero's Image

Germany’s loss is investors’ gain: Opportunity arises from the country’s bitcoin selling spree


On Friday, Germany's football squad faced a tough knockout loss at home in this year’s Euros. Our team at Hashdex, however, was tracking another botched opportunity in the country last week: their government’s selling of bitcoin it had seized from criminal activity. For football fans, this move was reminiscent less of the perfect machinery of the 1974 Beckenbauer team and more of Brazil's disastrous 7-1 loss against the Teutonic titans in 2014. 


This selling pressure has dragged on the market, with crypto prices dipping to a four-month low. Bitcoin (BTC) fell nearly 8% and the Nasdaq Crypto™ Index (NCI)—developed in partnership with Hashdex to reliably benchmark the institutionally investable crypto market—dropped 9% for the week. The negative crypto asset performance has not solely been driven by the German government’s bitcoin dump. Repayments to creditors from the 2014 Mt. Gox exchange hack started last week and it remains unclear how much of the US$9 billion being returned will be sold. Additionally, some bitcoin miners—particularly those struggling with profitability—are being forced to sell their BTC in the wake of the most recent halving, which reduced the issuance of new bitcoin by half. 

These two downside catalysts were expected, but the sale of Germany’s bitcoin—at least the speed and manner at which it has transpired—has been somewhat surprising. This has forced us to ask a couple of important questions:

  • First, what does this mean for short-term prices? 

  • Second, how does this impact the long-term investment case for crypto assets? 


To answer the first question, some context is helpful. Germany had approximately 50,000 bitcoin before its selling began. As of today, July 10, about a quarter of that bitcoin, valued at roughly US$800 million, remains. Typically, what we have seen in the past with governments selling confiscated crypto is a very orderly process that relies on OTC desks, not public exchanges, to minimize the market impact. For example, the US government earlier this month partnered with Coinbase to ensure an organized and secure liquidation of its digital assets after conducting a lengthy due diligence process. The German government approached the task more haphazardly, potentially leaving money on the table and creating a lot of noise along the way. 

The market has, however, handled this chaotic selling well, even with the tremendous speculatory behavior and rumors around order flow that ensued. Most importantly, at the current pace, it seems as if the German government’s sale of BTC will be complete within a matter of days, not weeks. As a result, we do not anticipate this sale will continue to have an outsized impact on near-term prices.   


Germany’s sale of BTC is rapidly tapering off

Source: Arkham Intelligence, accessed July 10, 2024

Regarding the second question about the longer term impact, it’s important to note that during last week's nearly double-digit losses, inflows to crypto asset funds were around US$400 million. This was the first week in the last four with positive flows and we believe it's a clear sign that many investors are viewing the current price dips as an opportunity to allocate. 


It’s always important to step back from near-term price action during these drawdowns. The NCITM and bitcoin remain up over 30% year to date. The type of supply shock we have seen tends to have a very short-term impact as speculation drives negative performance before cooler heads ultimately prevail. While it’s common for crypto’s investment thesis to be questioned during these times, historical data reinforces that these drawdowns—sometimes exceeding 20% or more—are completely normal in bull markets. All in all, this means that the one-off events witnessed in the last month have no material impact on our long-term thesis for this asset class. To the contrary, we believe the current conditions are creating a great entry point for investors.

Further, some German policymakers are calling into question the uncharacteristically chaotic process in which the recent selling has occurred, suggesting the move may be due to budget deficits or politically motivated. Regardless of the motivation behind this selling, this is the latest example underscores why we continue to believe governments globally should avoid short-sighted actions, including holding it as a strategic reserve asset, as they stand to benefit tremendously from this technology.

The German football team, a young group with great promise, will certainly have another chance to win the Euros in 2028. But the country’s selling of the world’s best performing asset of the past 15 years may prove to be the bigger loss.


¹Nasdaq and Messari data as of July 10, 2024.


This material expresses Hashdex Asset Management Ltd. and its subsidiaries and affiliates (“Hashdex”)'s opinion for informational purposes only and does not consider the investment objectives, financial situation or individual needs of one or a particular group of investors. We recommend consulting specialized professionals for investment decisions. Investors are advised to carefully read the prospectus or regulations before investing their funds. The information and conclusions contained in this material may be changed at any time, without prior notice. Nothing contained herein constitutes an offer, solicitation or recommendation regarding any investment management product or service. This information is not directed at or intended for distribution to or use by any person or entity located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject Hashdex to any registration or licensing requirements within such jurisdiction. No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent of Hashdex. By receiving or reviewing this material, you agree that this material is confidential intellectual property of Hashdex and that you will not directly or indirectly copy, modify, recast, publish or redistribute this material and the information therein, in whole or in part, or otherwise make any commercial use of this material without Hashdex’s prior written consent. 

Investment in any investment vehicle and cryptoassets is highly speculative and is not intended as a complete investment program. It is designed only for sophisticated persons who can bear the economic risk of the loss of their entire investment and who have limited need for liquidity in their investment. There can be no assurance that the investment vehicles will achieve its investment objective or return any capital. No guarantee or representation is made that Hashdex’s investment strategy, including, without limitation, its business and investment objectives, diversification strategies or risk monitoring goals, will be successful, and investment results may vary substantially over time. Nothing herein is intended to imply that the Hashdex s investment methodology or that investing any of the protocols or tokens listed in the Information may be considered “conservative,” “safe,” “risk free,” or “risk averse.”

Certain information contained herein (including financial information) has been obtained from published and non-published sources. Such information has not been independently verified by Hashdex, and Hashdex does not assume responsibility for the accuracy of such information. Hashdex does not provide tax, accounting or legal advice. Certain information contained herein constitutes forward-looking statements, which can be identified by the use of terms such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue”  “believe” (or the negatives thereof) or other variations thereof. Due to various risks and uncertainties, including those discussed above, actual events or results, the ultimate business or activities of Hashdex and its investment vehicles or the actual performance of Hashdex, its investment vehicles, or digital tokens may differ materially from those reflected or contemplated in such forward-looking statements. As a result, investors should not rely on such forward- looking statements in making their investment decisions. None of the information contained herein has been filed with the U.S. Securities and Exchange Commission or any other governmental or self-regulatory authority. No governmental authority has opined on the merits of Hashdex’s investment vehicles or the adequacy of the information contained herein.

Logo Hashdex
The material contained on this website is for informational purposes only and Hashdex, and its affiliates, is not soliciting any action based upon such material. The material is not to be construed as investment advice nor is it to be construed as recommendation, offer or solicitation to buy or sell any financial instrument or product or to adopt any investment strategy. Further, the material contained on this website does not constitute a representation that the financial instruments described therein are suitable or appropriate for any person. Past performance is not an indication of any future performance. This website may contain advertising of financial products.