The negative impact of OTC auctions on prices may not last long.
Just ten days after the U.S. government once again promised to provide $6 billion in military security assistance to Ukraine, the Department of Justice was preparing to initiate the liquidation of a large amount of Bitcoin assets.
On January 9, an official confirmed to DB News that the Department of Justice had been authorized to dispose of 69,370 Bitcoins seized in the infamous Silk Road case. This asset currently has a market value of approximately $6.5 billion.
It is reported that the Department of Justice requested permission to sell these assets due to Bitcoin price fluctuations. When asked about the next steps, a spokesperson for the Department of Justice stated: 'The government will take further action based on the judgment of this case.'
After the news broke, Bitcoin fell more than 2.5% in 24 hours, and at the time of writing, the price was $94,400.
One of the most influential milestones in Bitcoin history: Silk Road.
In October 2013, a young man named Ross Ulbricht was arrested in a library in San Francisco, using the alias 'Dread Pirate Roberts' (abbreviated as DPR), marking the end of the once notorious drug and weapon trading website 'Silk Road'. In 2015, Ross Ulbricht was sentenced to life imprisonment.
This dark web marketplace, which was born in 2011, initially provided a trading platform for various illegal goods and services in a 'eBay-like model', such as drugs, fake documents, hacking tools, etc. Due to the anonymity of the dark web and Bitcoin as the main payment tool, Silk Road quickly developed and was regarded as one of the most famous and largest illegal markets in the dark web.
From 2012 to 2013, the FBI, DEA, and other law enforcement agencies began to closely monitor Silk Road, secretly deploying undercover personnel. Due to the platform's frequent and large-scale transactions involving illegal activities across multiple countries, U.S. law enforcement agencies listed it as a key target.
The FBI seized approximately 170,000 Bitcoins from the Silk Road case, making it one of the largest Bitcoin law enforcement seizures in history.
Law enforcement officers gained access to related encrypted wallets through the laptops and server information seized during Ross Ulbricht's arrest. Since Bitcoin transactions require a private key for transfers, once law enforcement obtains a valid private key, they can transfer the corresponding Bitcoin from the suspect's address to an official 'custodial' wallet.
This is not the first time the U.S. government has sold Bitcoin.
Since 2014, the U.S. government has auctioned off Bitcoins seized from the Silk Road case multiple times, and the timing and impact on market prices are worth revisiting.
In June 2014, the U.S. government held its first public auction of Bitcoins seized from Silk Road. The U.S. Marshals Service auctioned approximately 30,000 Bitcoins. Bidders included many investment institutions and individuals, with well-known investor Tim Draper winning bids multiple times. In subsequent auctions, the government sold the remaining Bitcoins in batches.
After the auction was completed, the price of Bitcoin remained stable around $600 without experiencing a 'collapse'. The auction process demonstrated active bidding from institutional investors, thus reinforcing Bitcoin's 'legitimization' to some extent.
In December 2014, a second round auction of 50,000 Bitcoins, nearly double the size of the first auction, was held, and market expectations were similarly pessimistic. However, after the auction concluded, Bitcoin still maintained fluctuations in the $300 to $400 range without experiencing consecutive sharp declines.
In March 2015, another 50,000 Bitcoins were auctioned off, at which point Bitcoin had already recovered from its previous lows. The previous panic in the market further weakened, and the price quickly stabilized after slight fluctuations between $280 and $300.
In November 2015, the numerous Bitcoins auctioned off by the U.S. government by the end of the year did not cause significant market turmoil. Instead, due to continuous bidding from buyers, these auctions were interpreted as a symbol of Bitcoin gradually gaining more 'legitimate investment' status.
As of today, the U.S. Department of Justice has been authorized to liquidate the remaining 69,370 BTC (worth approximately $6.5 billion) seized in the Silk Road case, and the wallet address marked as 'bc1qa5' associated with Silk Road has been dormant for over 4 years.
Based on past selling history, Bitcoin prices may experience a brief price panic, but in the long run, since the U.S. government has often conducted OTC auctions, it may not sell at market price, and the negative impact on Bitcoin prices will not last long.
Will Trump's pardon and Bitcoin reserve promise delay the sale?
In May 2024, during Trump's presidential campaign, he promised at the Libertarian National Convention in Washington, D.C., that if he were re-elected, he would reduce the sentence of Silk Road founder Ross Ulbricht on the first day. On July 28, Trump reiterated his commitment to reduce Ross Ulbricht's sentence at the Bitcoin 2024 conference.
On November 14, Ross William Ulbricht posted on X platform for the first time after the U.S. elections, saying, 'I sincerely thank everyone who voted for President Trump. I believe he will keep his promise and give me a second chance. After spending more than 11 years in darkness, I finally see the light of freedom at the end of the tunnel. Thank you very much.'
As of now, bets on 'Will the U.S. government sell Bitcoin before Trump takes office?' on PolyMarket have become a hot bet, with a betting volume of $136,310, and the probability of selling Bitcoin before Trump's inauguration is 22%.
In light of Trump's previous promise to reduce the sentence of Silk Road founder Ross and his repeated statements about making the U.S. the world's cryptocurrency capital and embracing cryptocurrencies.
Therefore, most people believe that Ross may be granted a sentence reduction or even a pardon. Similarly, in the betting topic on PolyMarket about 'Who will be pardoned within 100 days of Trump's inauguration?', the likelihood of Ross being pardoned is very high, with a current probability of 73%.
Due to Trump's Bitcoin reserve promise, if the U.S. government does not sell before January 20 when Trump is officially inaugurated, the market speculates that the Bitcoins seized in the Silk Road case may not be sold.
How much Bitcoin does the U.S. government still have?
According to data from Bitcoin Treasuries, the number of Bitcoins held by the U.S. government is 207,189, accounting for 0.987%. Based on the current Bitcoin price, the total value of Bitcoins held by the U.S. government is $19,544,018,200.
