US Government to Auction $118 Million Worth of Seized Bitcoin – Market Experts Downplay Impact”

It is unlikely that the auction will disrupt Bitcoin prices or market stability significantly.

The U.S. government is set to auction approximately $118 million worth of Bitcoin seized in the Silk Road case. However, market commentators suggest that this sale is unlikely to cause concern, citing its relatively small impact compared to recent cryptocurrency market activities.

The seizure notice, dated January 10 and gaining attention on social media on January 24, outlines the government’s plan to dispose of around 2,934 bitcoins. This action follows the conviction of Silk Road kingpin Ross Ulbricht and his father Joseph Farris, who were found guilty of money laundering on January 8.

Market Confidence Prevails

Despite initial concerns about widespread “dumping” of Bitcoin, many experts believe that the government’s sale will have a minor impact on the cryptocurrency market. Steven Lupka, Managing Director at Bitcoin exchange Swan Bitcoin, compared the government’s plans to recent outflows from the Grayscale Bitcoin Trust (GBTC), stating, “Sunflower seeds, we were eating GBTC sales 4 times this amount for breakfast.”

This significant market activity highlights investors’ flexibility in dealing with larger transactions.

GBTC sold 106,575 bitcoins worth $4.2 billion since transforming into a Bitcoin spot ETF on January 11. The recent outflow from GBTC occurred on January 24 when 10,871 bitcoins were sold.

U.S. Government Holdings and Upcoming Auctions

Data from cryptocurrency firm 21.co reveals that the government owns an estimated 194,188 bitcoins, equivalent to around $7.7 billion. However, this represents less than 1% of the total circulating supply of Bitcoin. The upcoming auction involves 51,326 bitcoins seized from Silk Road hacker James Chon. Approximately 41,000 bitcoins are scheduled for sale through four auctions throughout 2023.

Seizures include 94,643 bitcoins in January 2022 from the Bitfinex hack in 2016, and 69,369 bitcoins in November 2020 related to the Silk Road case.

The U.S. government’s Bitcoin sales through public auctions date back to 2014 when venture capitalist Tim Draper acquired nearly 30,000 bitcoins in an auction. Recently, the government opted to sell seized cryptocurrencies on exchanges rather than through traditional auctions. The last known sale occurred in March 2023, involving 9,118 bitcoins.

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Analysts and market experts anticipate that the planned government auction will have a limited impact on overall cryptocurrency market stability. While the sale represents a substantial amount, it is relatively small compared to recent market activities, and its effects are expected to be absorbed by the cryptocurrency ecosystem’s resilience.

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