In a world where the price of BTC sometimes fluctuates at lightning speed, the announcement of the sale of nearly $118 million in Bitcoin (BTC) by the US Government caused stress. This decision, following the seizure of bitcoins linked to the Silk Road affair, raises a question for some members of the crypto community: will this sale have an impact on the Bitcoin market?
US Government BTC Sale: Silk Road Link
The United States has become particularly hostile to Bitcoin (BTC) and decentralized cryptocurrencies under President Joe Biden. Particularly since the latter appointed Gary Gensler as head of regulators at the SEC (Securities and Exchange Commission). However, American federal agencies own a lot of crypto-assets, following seizures. This is the case of the Federal Bureau of Investigation (FBI).
In this context, the United States government is preparing to sell approximately 2,934 BTC, a large sum on the surface, but which requires context. This sale follows the money laundering conviction of Ryan Farace and his father in the Silk Road affair.
In detail, in 2018, the United States Department of Justice charged Farace, known under the pseudonym “Xanaxman,” with illegally selling Xanax on the dark web, in exchange for Bitcoin. Earlier this month, the U.S. Attorney’s Office said Farace and his father, Joseph Farace, were both sentenced to prison for conspiracy to commit money laundering by the court.
Farace used the infamous Silk Road website for his illegal transactions. In December, a US appeals court formalized the confiscation of 69,370 BTC linked to the now-shuttered Silk Road black market.
It’s a Minor Sell-Off Compared to Grayscale!
However, in comparison to recent market movements, such as the Grayscale Bitcoin Trust (GBTC) sell-off, this amount of BTC seems less imposing. Indeed, since converting to an exchange-traded fund, GBTC has sold 106,575 BTC, worth $4.2 billion. By comparison, the government sale represents only a fraction of these recent trades.
This sale, planned by the United States government, is part of a broader context of management of seized digital assets. Indeed, these bitcoins constitute only 1.5% of the total estimated at 194,188 BTC, or $7.7 billion, accumulated through three major seizures.
Is the USA the BTC Whale That Everyone Fears?
The first notable seizure was that of 94,643 BTC in January 2022, linked to the 2016 Bitfinex hack. The second concerns 69,369 BTC seized in November 2020, from Silk Road, the famous black market platform. Finally, 51,326 BTC was stolen by James Zhong, a hacker also linked to the Silk Road. We can then understand the scale of the Bitcoin assets that he has accumulated over the years.
Historically
The US government opted for auctions to sell these seized bitcoins, with memorable examples including the sale of nearly 30,000 BTC to Tim Draper in 2014. However, the trend has evolved towards sales on exchanges, as evidenced by the last known sale of 9,118 BTC in March 2023.
To the question will the American government bring down Bitcoin, we will therefore answer no without hesitation. The U.S. government’s planned sale of seized bitcoins is certainly significant, but it must be put in context of GBTC’s larger activities and overall market trends. So don’t panic, even if caution is still required.
