Experts say China could hold $6 billion in several cryptocurrencies after seizures and the mining ban of 2019.
China was once one of the most prominent crypto players. However, after the ban, the government divested (or so they made it believe) its portfolio of crypto assets. Some estimate that China may still have $6 billion in cryptocurrencies, especially in Bitcoin and Ethereum, following a 2019 seizure of a Ponzi scheme.
Specifically, China still holds a portfolio of cryptocurrencies thanks to the seizure of the Ponzi scheme PlusToken. The episode amounted to as much as $6 billion, a coincidence. Some Blockchain specialists and analysts worry about what would happen if China decided to liquidate its entire cryptocurrency portfolio.
China crypto holdings - How would it affect the market?
According to Ki Young Ju, CEO of blockchain data analytics firm Cyptoquant, "China's government is a crypto whale." The situation relates to the seizure of 194,000 Bitcoin and 833,000 Ethereum, and other cryptocurrencies from the PlusToken Ponzi scheme. According to Young Ju, these securities are under the custody of the national treasury.
If this were true and China still holds such an amount in its wallets, it would make the Asian giant one of the world's most important Bitcoin Whales. It is eclipsing Coinbase and even MicroStrategy. Guaranteeing it a significant influence over the crypto markets, something they could take advantage of when the time is right.
However, China is one of many countries that may have secretly transformed itself into a Bitcoin Whale. Young Ju says, "Liquidity on the sell-side from miners, institutional investors, and retail investors is next to nothing compared to governments." According to Young Ju, the government of Bulgaria could even have more than 200,000 Bitcoin accumulated.
The situation would transform some countries into the most significant Bitcoin investors, even though their policies often go against the expansion of cryptocurrency because of tax policy problems and even promote financial freedom against the traditional financial system.
Cryptocurrency seizures create Bitcoin whales
Occasionally, governments seize cryptocurrencies after organizations or individuals commit crimes or scams. One example is the case of cryptocurrencies taken by the United States in 2016 following the hacking of Bitfinex or Silk Road operator Ross Ulbricht. Although the U.S. has stated that it has been progressively divesting itself of cryptocurrencies, it is believed still to possess a figure close to $4 billion.
On the other hand, sales by governments or private organizations could trigger a price crash or a crypto crisis like the one we are currently experiencing. According to Young Ju, "Bitcoin fell from US$30,000 to US$17,000 due to liquidity on the sell-side of Luna." Although Luna's fall triggered a domino effect, many other factors were involved.
If China or the United States decided to get rid of all their crypto reserves obtained through seizures, the price of Bitcoin, according to Young Ju, would drop twice as much as it did after Luna's fall.