Recent plans by the United States government to sell over 2,900 seized Silk Road Bitcoin, valued at $118 million, have sparked discussions within the crypto community. Following the sentencing of Silk Road Xanax dealer Ryan Farace and his father for money laundering conspiracy, concerns were raised about a potential market “dump.”
However, market commentators, including Steven Lubka, Managing Director at Bitcoin exchange Swan Bitcoin, dismissed these worries, labeling the planned government sale as “peanuts” in comparison to recent outflows from the Grayscale Bitcoin Trust (GBTC). The GBTC has reportedly sold 106,575 BTC, totaling $4.2 billion, since its conversion to a spot Bitcoin exchange-traded fund on January 11.
The government’s planned sale represents just 1.5% of its total Bitcoin holdings, amounting to 194,188 BTC or $7.7 billion, accumulated from three seizures in criminal cases. Despite some concerns, this figure is still less than 1% of Bitcoin’s circulating supply.
The three significant Bitcoin hauls and sales by the U.S. government include 94,643 BTC seized in January 2022 from the 2016 Bitfinex hack, 69,369 BTC seized in November 2020 from the Silk Road, and 51,326 BTC seized from Silk Road hacker James Zhong. Approximately 41,000 BTC is set to be offloaded in four sales throughout 2023.
While the government has a history of auctioning Bitcoin, recent trends have seen a shift towards selling seized crypto on exchanges rather than through auctions. Notably, venture capitalist Tim Draper’s 2014 purchase of nearly 30,000 BTC in a government auction remains one of the most significant examples of such transactions. The latest known sale of 9,118 BTC occurred in March 2023.
