The US government transferred 19,800 BTC, worth just under US$2 billion, to Coinbase Prime yesterday, potentially hinting at a planned sale. BTC is part of a huge amount of assets seized by the US government as part of a criminal case against the now-defunct illegal online marketplace Silk Road. Historically large government sales of Bitcoin have caused market declines, such as when the German government sold earlier this year, but so far BTC prices have remained stable.
The US government yesterday transferred 19,800 Bitcoin (BTC) worth just under US$2 billion (approximately AU$2.9 billion) to Coinbase Prime, leading many to believe it is planning a major sale. This could cause the price of Bitcoin to fall. The transferred Bitcoins were seized as part of a criminal case against Silk Road, an illegal market.
The transfer was made from a wallet tagged as “U.S. Government: Silk Road Department of Justice Confiscated Funds” by blockchain analysis firm Arkham Intelligence.
Related: Chainalysis report debunks myths about the role of cryptocurrencies in crime
Concerns that government sales could cause declines
Typically, when governments transfer large amounts of cryptocurrencies to centralized exchanges, it is an indication that large-scale buying and selling will take place. When a government actually sells, as the German government did earlier this year, it often destabilizes the cryptocurrency market and triggers a large selloff.
But so far, news of US government changes has not had a major impact on the market. At the time of writing, Bitcoin was down just 2.2% on the day, trading at just under US$96,000 (A$148,000), according to CoinGecko.
Even after transferring this latest Bitcoin tranche to Coinbase, the US government continues to hold more than US$18 billion (A$27.8 billion) of cryptocurrencies seized as part of a criminal case.
US government’s strategy to sell confiscated cryptocurrencies
The transferred Bitcoins are part of more than 50,000 Bitcoins seized by the US government during James Zorn's arrest in 2022. Zhong later pleaded guilty to wire fraud after the government indicted him in 2012 for illegally manipulating Silk Road's payment system.
In October, the U.S. Supreme Court refused to hear a case regarding the ownership of Bitcoin seized from Silk Road, clearing the way for the sale.
The last time the US government sold a portion of Silk Road BTC was in March 2023, when approximately 10,000 BTC were sold for approximately US$216 million (A$334 million). In the sale application, the government revealed plans to sell the remaining Bitcoin in 2023, but the sale was not specified.
Related: Coinbase partners with U.S. Marshals Service for enhanced crypto asset management solutions
In July of this year, the U.S. Marshals Service, part of the U.S. Department of Justice, said it had partnered with Coinbase Prime as part of a strategy to store and sell “a large amount of popular cryptocurrency assets known as Class 1.” Announced. Cryptocurrency”. Class 1 cryptocurrencies are the bureaucratic term for cryptocurrencies with large market capitalizations, such as Bitcoin and Ethereum.
