21 Jul 2022

236,237 BTC sold by known institutions in the last two months

236,237 BTC. That’s the amount of known selling of bitcoin since May 10th by large institutions. Most of the selling is related to forced selling, some is not. We provide a brief post-mortem on the selling pressure and contagion in the last two months.
Known sellers.svg
Source: Luna Foundation Guard, Tesla, Purpose, 3AC Court Documents, Dune, Monthly Miner Production Updates *Tesla’s BTC sell order is estimated based on selling 75% of BTC holdings of 38,748 BTC. The Tesla holding estimate is based on a VWAP estimate from Jan 4th-Jan 29th (43,053 BTC 2021 and a subsequent 10% sell in April 2021.
The 236,237 BTC number is derived from massive institutional blow-ups and other large known selling seen during the market stress in the last two months. The number does not account for other natural capitulation and hedging activity that usually occurs during crypto bear markets.
It all started with Do Kwon and LFG
Source: BitApps, Luna Foundation Guard
As LFG reached its initial $3bn BTC reserves target, it took 5 days before UST’s peg was in shambles, and the 80,000 BTC reserve was deployed in a desperate attempt to save the peg. Luna and UST collapsed, leading to contagion and more sell-side pressure in the months to come.
Initial miner selling in May
Markets soured, and public miners were pressured to initiate the selling of their precious BTC holdings in May.
Source: Monthly production updates (All public miners)
Public BTC miners sold 4,456 BTC in May.
Some time in between and amidst this. Tesla sold 75% of its BTC stack. We estimate Tesla’s sales to be 29,060 BTC at an average price of $32,209.
Source: Tesla, Tradingview, Arcane Research
This estimation is based on previous VWAP estimates from their initial BTC purchase (avg price $34,841) and the sale of 10% of their BTC to “test liquidity” in Q1, 2021. Assuming the 10% BTC sold in Q1 was sold at $50,000, Tesla’s new break-even price of BTC was approximately $33,325, meaning that Tesla sold at a small loss.
Enter June 10th, and the U.S. CPI surprise. Correlation sent prices south, bankrupting several whales already under pressure post Luna’s collapse. On June 12th, Celsius halted withdrawals, and rumors regarding 3AC’s meltdown murmured. Leaked court documents have revealed that 3AC owes lenders 18,193 BTC and a GBTC equivalent of 22,054 BTC.
Source: Leaked Affidavits
Following the collapse, 3AC creditors hedged and de-risked exposure in attempts to fix the balance sheet holes while liquidating 3AC, causing a proper fire sale.
Purpose liquidation
Amid the Luna, 3AC, Celsius contagion, a massive redemption of 24,510 BTC occurred in the Canadian Purpose ETF creating further fire sale pressure in the market.
Miner selling intensifies in June
Markets got bleaker, and the small selling pressure from BTC miners in May grew big in June. Public bitcoin miners sold 14,600 BTC in June.
Public Miners - Bitcoin Sold in 2022.svg
Source: Monthly production updates
Celsius preparing for Chapter 11
Celsius’ prepared for Chapter 11 and repaid its DeFi loans, freeing up 21,962 WBTC in early July.
Source: Coingecko
Atop of the WBTC, Celsius had a substantial allocation in stETH, rumored to be acquired by Alameda at a 15% discount in June. Alameda likely hedged their stETH exposure, leading ETH OI to moon while creating a temporarily brutal downward pressure in ETH, impacting the wider crypto market.
The issue with macro on-chain indicators
In late April, I tried to challenge the view of certain macro on-chain indicators. Most of the selling pressure since May has originated from sources not necessarily reflected in exchange balances and sources I mentioned when looking into how the “productification” of bitcoin might impact the market.
Source: Glassnode, Skew, Dune, MicroStrategy, Tesla, Square, Meitu, Aker, Bytetree, VanEck, Proshares, Hashdex, StatusInvest
So where are we now?
The last 2 months have been an obvious capitulation. Most of the selling of the 236,237 BTC mentioned above has been forced selling, and it’s likely been worse than what this research covers with underwater retail and institutions capitulating. The Chapter 11s, 3AC court documents, normalization of the stETH/ETH price, and the relief rally seen in the last few weeks tell me that contagion is getting resolved. Less uncertain times ahead.
Source: Tradingview (FTX)
Contagion done for now
I tend to lean in favor of forced selling and contagion-related uncertainty being done for now. Markets will normalize. We will likely slump, pump, and dump in choppy conditions in the coming period, and macro and correlations will possibly resume being the key force of the market.
Source: Tradingview
However, the reduced presence of dollar-indebted institutions (i.e Tesla and miners) might contribute to lifting some of the correlation forces.
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