Why isn’t Germany auctioning its seized Bitcoin?

Darren Franceschini, co-founder of Fideum, pointed out that institutions tend to acquire “clean” Bitcoins, that is, those with no criminal connections. Recent changes in the way law enforcement agencies liquidate and seize Bitcoins have had a significant impact on the market. Data from the Arkham platform shows that the German Federal Criminal Investigative Service has continuously transferred large amounts of Bitcoin to exchanges, totaling more than $150 million, part of which has flowed into Flow Traders.

The move, along with Mt. Gox’s imminent release of Bitcoin holdings, has sparked widespread discussion about how governments can effectively liquidate large-scale cryptocurrencies. In the past, governments have not often sent large amounts of Bitcoin directly to exchanges, but current trends suggest that governments may be more interested in liquidating quickly rather than maximizing returns.

Arthur Cheong of DeFiance Capital questioned on social media the reason why the government abandoned the auction method, believing that auctions may bring premiums. Matthew Kaye of Intuition Systems analyzed that the government may tend to choose easy ways to monetize due to resource constraints or insufficient professional knowledge. Ganesh Swami of Covalent further pointed out that the government has accumulated a large amount of unrealized gains when Bitcoin prices were low, and is no longer sensitive to small price differences, so it does not pursue auction premiums.

Looking back at history, the U.S. government’s early Silk Road Bitcoin auctions through the USMS, although groundbreaking, also suffered losses due to premature selling. As the market matures, many governments have begun to adopt more flexible market-oriented methods to deal with the seizure of Bitcoin, such as Finland's cooperation with crypto brokers and Sweden's sales through exchange platforms.

Fideum co-founder Darren also revealed the impact of buyer preferences on government decisions: Institutions are more inclined to purchase untainted Bitcoins because they are concerned about the legality of funds. This creates a paradox: while seized Bitcoins may fetch a premium at auction, their criminal background makes them less attractive to potential buyers.

Mt. Gox’s liquidation plans add new uncertainty to the market. The release of these Bitcoins will be determined by individual creditors who have been waiting for years to recover their funds. Arkham reported that the Mt. Gox trustee has transferred a huge amount of Bitcoin, and the market reaction will continue to be watched.

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