The US Government Holds more than 214,000 BTC; Is Dumping an Option?

US law enforcement officials on Monday last week announced that they had seized around 50,000 Bitcoins that had been used in illegal activity on Silk Road-an online marketplace. This recent seizure brings the total amount of Bitcoin held by the United States government to 214,000 Bitcoins. The US holds around $3.62 billion worth of Bitcoin using the current exchange rates. With this recent addition, the US seized stash has now surpassed MicroStrategy company stash. The company which Michael Saylor owns holds about 130,000 Bitcoins.

The US-seized Bitcoin stash has grown exponentially over the past two years. Most of the Bitcoins in America are now held by the government, which seized them over the last two years. The first seizure occurred toward the end of 2020, in November. The US government seized circa 69,370 Bitcoin from a user only known as “Individual X” involved with Silk Road. At the time, the seizure meant that the US government was the most significant Bitcoin in the world.

The other seizure occurred early this year in February. The government seized more than 90,000 Bitcoin when an on-chain analyst figured out that a considerable number of Bitcoins taken from the 2016 Bitfinex hack were amalgamated into a single Bitcoin address. After the seizure, the government also arrested two suspects.

Consequently, the US government now holds over 1% of the total 21 million Bitcoins in supply. There have been concerns that the government might decide to dump these coins. However, it is improbable that this will happen.

Over the years, Bitcoin seized by the government is usually auctioned off to investors without impacting the crypto market. However, it has been a minute since the US government auctioned any Bitcoins, and it remains to be seen how the market will behave. However, it is worth noting that the GSA auctioned more than $350k worth of Bitcoin and LTC in June 2021. Additionally, the government also sponsored several small-scale Bitcoin auctions in 2021.

The largest known Bitcoin holder today after the United States government is GBTC (Grayscale’s Bitcoin Trust) which holds more than 640,000 Bitcoins. It is important to note that the US government had numerous chances to sell the Bitcoins they held for much more than what they cost today. And by much more, I mean a whopping $4.22 billion. The first seized stash back in 2020 could have been sold for around $60k per coin, while the other stash seized in February could have gone for $40k each. Over the years, the US government has sold its stashed BTC at a loss compared to what it would have gotten if reasonable exchange rates were used.

This is not the first time that the United States government has become one of the largest holders of Bitcoin. In 2013it also held confiscated Silk Road coins. These coins were later sold in an auction in 2014 to investors such as Tim Draper, who bought Bitcoin worth $19 million.

Bottomline, holding more than 1% of the total Bitcoin in circulation means that the United States government has its fingers deep into the crypto market. It is implausible that it will dump the coins onto the market. This is because all seized BTC are usually sold via an auction to the public. Usually, they are sold at relatively lower prices compared to what crypto exchanges offer.

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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.