Germany Already Lost $124 Million in Profits from the Sale of its Bitcoin
The Saxony government’s revenue potential was significantly affected by the timing of the sale.
On July 13, the German state of Saxony completed the sale of 50,000 BTC confiscated from the movie piracy site movie2k for approximately $2.87 billion. This transaction secured a profit of more than $740 million compared to the acquisition cost of $2.13 billion in January.
However, immediately after the sale, the price of bitcoin jumped as much as 16.55%, boosted by the assassination attempt on former US President Donald Trump, which subsequently increased his chances of re-election in November.
Maximum Yields Not Reached in March
The timing of the sell-off had a significant impact on the potential returns for the Saxon government. In March, bitcoin hit an all-time high of around $74,000, offering a golden opportunity for further gains.
A theoretical sale of 50,000 BTC at that peak could have generated a profit of $1.5 billion. In contrast, the 12% drop in the price of bitcoin during the German government’s sale exacerbated the potential for lost profits.
Emergency Sales and Miscalculated Potential
The Dresden Public Prosecutor’s Office initiated “emergency sales” of bitcoins in June, fearing a potential drop in value of 10% or more. The prosecutor’s office clarified that the sale of valuables prior to the conclusion of criminal proceedings is mandatory by law whenever there is a risk of significant loss of value, especially given the notorious volatility of bitcoin.
“The sale of valuables prior to the conclusion of an ongoing criminal case is required by law when there is a risk of significant loss of value of approximately ten percent or more,” the office said.
It emphasized that “Law enforcement agencies are prohibited from speculating on the value of seized property in anticipation of possible price increases. The goal was to secure funds for the criminal case against movie2k, not to maximize profits.”
Legal and Market Realities
The Dresden Public Prosecutor’s Office insisted that the emergency sale had achieved a fair market price. “The transaction volume in the bitcoin market is considerable. Despite the government’s justification, the decision to sell in the midst of strong interest in the bitcoin market, particularly among ETF and fund investors, raises questions.
During the selling period, bitcoin saw its fifth-largest weekly inflow on record at $1.35 billion, while short positions saw their largest weekly outflow since April at $8.6 million. According to James Butterfill, a researcher at asset manager CoinShares, the weakening of prices due to the German government’s sale of bitcoins and a change of sentiment due to the US consumer price index falling short of expectations encouraged investors to add to their holdings.
Concluding Remarks
Germany’s decision to sell its bitcoin holdings under emergency conditions highlights the complexities and risks associated with managing cryptocurrency assets, particularly under legal and procedural constraints.
While the government made a substantial profit, the timing of the sale resulted in a significant missed opportunity, underscoring the importance of strategic planning and market knowledge to maximize returns.
This event serves as a cautionary tale for other governments and institutions dealing with seized cryptocurrency, highlighting the need for a balanced approach that considers both legal obligations and market potential.
By Leonardo Perez