Is China Dumping Bitcoin? Analyst Predicts BTC Price Crash to $40K

There is a rumor that China could be preparing to offload substantial BTC reserves. Chinese authorities, according to cryptocurrency analyst Leviathan, have about 194,000 BTC that they have acquired through various seizures. China is allegedly the second-largest government Bitcoin holder after the United States. This is significant as it could impact the BTC price.

Local Chinese Governments Allegedly Selling Bitcoin And Impact On BTC Price

The analyst states that despite cryptocurrency trading being illegal in mainland China, local governments have been quietly selling confiscated Bitcoin through third-party intermediaries. As per his findings, $400 million has been allegedly liquidated. This selling activity is described as “only beginning” and could majorly impact the BTC price if it continues or accelerates.

🚨 China plans to dump $BTC to $40K

They already sold it for $400M and it's only beginning

I'm risking a lot by revealing this, but here you go

Here's what China is secretly doing and it will affect on BTC👇🧵 pic.twitter.com/ponfsFDvFM

— Leviathan (@TechLeviathan) April 17, 2025

According to the analyst’s claims, Chinese local governments have developed a system to capitalize on confiscated cryptocurrency despite the country’s official ban on crypto trading.

These authorities are reportedly using an unofficial “backdoor” method to sell seized Bitcoin on foreign exchanges through intermediary companies. They are allegedly converting the proceeds into yuan before transferring the funds back to city finance departments.

The report puts the focus on Jiafenxiang, described as a little-known Shenzhen-based company. The company is said to have processed more than $400 million in cryptocurrency sales on behalf of several city governments.

The arrangement is said to exist in a legal gray area. The officials also referred to it as a “temporary” and “pragmatic” measure, while legal scholars contend it puts China’s cryptocurrency ban directly in contravention.

The findings come after recent reports that China plans to sell 15,000 Bitcoin on offshore exchanges. This represents a significant amount, which could impact the BTC price. This situation has reportedly developed due to two factors. One is a lack of national regulations regarding seized cryptocurrency and increasing financial pressure on local governments.

With no standardized protocol for handling confiscated digital assets, each province or city is said to be improvising its own approach. Simultaneously, Chinese municipalities are described as “strapped for funding,” with public income from fines and confiscations reaching 378 billion yuan in 2023.

China’s Sale Could Send Bitcoin To $40,000

The expert estimates that the year 2023 was historic in terms of crypto crimes happening in China, with a total amount of more than $59 billion in value associated with illicit activities, and over 3,000 money laundering cases being prosecuted. These enforcement operations are said to further swell the inventory of confiscated Bitcoins for possible sale.

The analyst shares several potential developments that could affect how China manages its alleged Bitcoin holdings and the impact on the BTC price. According to the report, multiple seminars have been held among judges, lawyers, and police. This was done to discuss building a consistent national policy on seized cryptocurrency.

Hong Kong is also cited as a possible solution, with its legal cryptocurrency infrastructure possibly providing cover for mainland operations. The special administrative region already permits ETFs for Bitcoin and Ethereum. This could theoretically provide a framework for handling China’s reported crypto hoard in a more formal way.

Legal advisors are said to be calling for the regulation of third-party firms involved in cryptocurrency liquidation. Currently, there is allegedly no oversight regarding how much is sold or the security procedures involved.

One lawyer even described the market as “lucrative and totally unregulated.” These concerns have prompted calls for an asset disposal agency under central control that would audit sales, verify exchanges used, and prevent potential corruption.

For Bitcoin markets, the implication is that continued selling from this alleged 194,000 BTC could exert downward pressure on prices. He stated that it could potentially cause Bitcoin’s price to fall to $40,000.