Nearly $2 billion worth of Bitcoin (BTC) linked to the now-defunct dark web marketplace Silk Road were moved by the Feds to America’s largest crypto exchange Coinbase on Monday.
This marks the latest high-profile transfer of the United States government’s Bitcoin holdings. Notably, even the indication that a gigantic Bitcoin whale such as a government is about to dump large amounts of the premier crypto is enough to send markets tumbling.
Inside US Government’s Latest BTC Transfer
According to data from on-chain intelligence firm Arkham Intelligence, a wallet tagged as “U.S. Government: Silk Road DOJ Confiscated Funds” sent some 19,800 BTC, worth around $1.92 billion, to a Coinbase Prime deposit address. U.S. authorities confiscated the BTC in a 2021 investigation of James Zhong, who last year pleaded guilty to wire fraud related to the Silk Road marketplace.
Zhong manipulated the Silk Road transaction system in 2012 to steal 50,676 Bitcoins. The Department of Justice seized the stash in 2022 after BTC’s price had surged significantly, making it one of the biggest Bitcoin seizures in history.
The Monday transfer likely signals that the government is preparing to sell the assets. Previous transfers by the Feds have triggered substantial sell-offs in Bitcoin. The BTC price is now up 0.4% over a 24-hour period, according to CoinGecko. Its price hovers at $95,389 at the publication time.
The US government still held roughly $18 billion worth of Bitcoin at the time of writing this, meaning it is the largest geopolitical holder of the flagship cryptocurrency.
U.S. Government Selling Its Bitcoin Holdings Is A “Huge Strategic Mistake”
Crypto industry observers quickly reacted to the U.S. government’s decision to shift almost $2B in BTC to Coinbase.
“This is a huge strategic mistake,” wrote Jason Lowery, the author of Softwar: A Novel Theory on Power Projection and the National Strategic Significance of Bitcoin. “There is no price where it makes sense for the US to sell any Bitcoin it has under its control. They have no idea what they own, and it shows.”
Lowery added:
“Remember this post when they inevitably try to justify a new version of EO 6102 to reclaim the Bitcoin they sold off due to their ignorance about the true significance of this technology.”
For those unaware, EO 6102 authorized President Franklin D. Roosevelt to force American citizens to relinquish their gold coins, gold bullion, and gold certificates. The executive order was implemented so that the U.S. government could devalue the dollar more aggressively to stimulate the economy during the Great Depression.
Coinbase CEO Brian Armstrong agreed with Lowery, noting that the government shouldn’t dump its BTC.
Notably, US lawmakers like Senator Cynthia Lummis and the incoming president Donald Trump, have proposed passing legislation to create a strategic Bitcoin reserve in the United States. The Wyoming Republican officially introduced the Bitcoin Act in August for the government to purchase 1 million BTC — approximately 5% of the total circulating supply — for five years to match the country’s gold reserves.
