- Chinaโs government will likely pour $1.3B worth of ETH into circulation.
- Previously, a similar move with seized BTC caused a sharp price drop.
- Top analysts mark $2,300 support levels as a likely momentum changer.
In 2018, a gigantic crypto Ponzi scheme caught the attention of the Chinese authorities, which seized a whopping 542 Ether (ETH) tokens in the process. PlusToken, the pyramid in question, took off in early 2018 to lure investors into a grandiose scheme that eventually amassed 194K Bitcoins (BTC) and 830K Ether.
Chinaโs Previous Sales Sound Alarm
The Chinese government confiscated $2.2B in loot from the scam. Two years later, it was established that the confiscated digital assets had been handed over to Beijing Zhifan Technology Company, which was responsible for converting these crypto assets into cash, while the proceeds were meant for restitution.
Most of the $2 billion assets in BTC were sold off between August 2019 and March 2020. During this time, roughly $1.3 billion worth of Bitcoin was sold, creating an estimated sell pressure of around $10 billion, according to blockchain researcher Free Samourai.
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The seized Ethereum assets were untouched until the summer of 2021. Then, approximately one-third of the 840 ETH in seized assets were sent to an obscure crypto exchange called Bidesk, while the remaining sat in thousands of mixer addresses. After remaining in hibernation for three years, these assets were rearranged into 294 new addresses in August 2024.
China Moves to Offload $1.3B in Ethereum
From the remaining 542K ETH tokens, 15.7K was sent to mixers on October 8, 2024. This has raised eyebrows among experts and large transaction-monitoring blockchain security firms. Of the 15.7K ETH, 7K were distributed between various crypto exchanges.
Free Samourai expects a similar action to Bitcoinโs sell-off in 2020. If ETH is distributed obfuscated across crypto wallets in preparation for a huge sell-off, this would create an unexpected supply overhang for Ethereum, damaging Etherโs market value.
Meanwhile, the largest Proof of Stake (PoS) networkโs native coin recouped the $2,400 support levels after dipping to a seven-day low of $2,345 yesterday. However, seasoned crypto analyst Ali Martinez aims to bring tradersโ attention to the current demand zone starting at $2,300.
This could be a win-or-lose situation for Ethereumโs price, as this key support level holds 52.59M tokens between 2.4 million wallets. Failing to meet the demand zone would send Ether below to slimmer support levels, where profitable ETH holders and investors in the red are nearly at the status quo.
On the Flipside
- Ethereumโs upcoming price trajectory also heavily relies on Bitcoin, as the two largest digital assets currently have a high price correlation of 0.91.
- The supply overhang caused by the potential $1.3 billion ETH sell-off could be matched with whale accumulation, softening the impact on Etherโs price.
- However, both 1-hour and 1-day charts for Ethereum showcase a negative Chaikin Money Flow (CMF) index, which hints at whale distribution.
Why This Matters
Governments selling off confiscated digital assets tend to have a visible impact on the market, as recently seen in Germanyโs massive Bitcoin sell-off.
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