Since confiscating nearly $3 billion worth of bitcoin in January, Germany's state of Saxony has sold over half of its initial holdings, causing distress in the market.

The state of Saxony, located in the eastern region of Germany, is responsible for the dumping of hundreds of millions of dollars worth of bitcoin. (Harald Nachtmann/Getty Images)

• It's not the country of Germany that's been selling millions of dollars worth of bitcoin, but a small German state called Saxony.

• The state confiscated almost 50,000 BTC in January and has been selling its holdings as per standard practice for assets seized during criminal investigations, an expert said.

For days, news outlets worldwide have reported on Germany's sale of hundreds of millions of dollars worth of bitcoin (BTC) and the ensuing distress in markets and major sell-offs in crypto prices.

First, it's not Germany itself that is selling the cryptocurrency. It is a small state in the eastern part of the country called Saxony.

Second, though crypto fans have roasted the decision to dump so much of their beloved bitcoin, Saxony doesn't have a choice.

Earlier this year, the state's Criminal Police Office (known by its German acronym LKA) seized 49,857 bitcoin (worth almost $3 billion at current prices) from the operator of Movie2k.to, a website Saxony found guilty of money laundering and other illegal activities.

About a week ago, a crypto wallet that belongs to the German Federal Criminal Police Office, or BKA, started moving thousands of BTC to exchanges including Kraken, Coinbase and Bitstamp, signaling an intent to sell them. The wallet's bitcoin holdings have dwindled to 23,788.

Reactions on social media have been harsh.

"Germany selling all their #Bitcoin will go down as one of the most retarded things their politicians ever did," one X user wrote.

"Germany's govt officials are literal idiots," another said.

?? Imagine selling the hardest money on earth #Bitcoin, for something you can print out of thin air.

Germany’s govt officials are literal idiots pic.twitter.com/TlWl3Z585E

— Vivek⚡️ (@Vivek4real_) July 9, 2024

But what's happening in Germany isn't a bad investment strategy – it is merely standard procedure that applies to assets confiscated in criminal investigations, an expert said.

"The general prosecutor's office of Saxony is responsible for liquidating confiscated assets, and the sell-off is hardly surprising," said Dr. Lennart Ante, co-founder and CEO of German-based Blockchain Research Lab. "Seized assets are always liquidated within a certain period. This is a routine business process, although at a larger-than-normal scale."

The reason why the wallet belongs to the country's BKA – not Saxony itself – is probably because the police agency was involved in the initial investigation and had the technical know-how to handle such a large amount of bitcoin, he speculated. However, BKA does not have decision-making power and solely acts on instructions from the state.

In most cases, confiscated assets can only be transferred or sold with the proceeds going to the state budget once a judge rules that the state is allowed to do so, which isn't the case in this particular situation. However, states can request to initiate an emergency sale, which could be issued if the asset's value might quickly lose value or is difficult to store, for example, Ante explained.

"In the case of bitcoin, this could at least be argued on the grounds of volatility," he said.

There is evidence, however, that Saxony is trying to sell too much bitcoin at once. On Tuesday, it received $200 million back from some of the exchanges, indicating that there wasn't enough demand to buy such a huge sum.