The US government has announced its intention to sell nearly 2,934 bitcoins, worth $118 million, from seizures linked to criminal cases. This decision, which comes against a backdrop of increased regulation of cryptocurrencies in the United States, raises questions about its potential impact on the bitcoin price.
The bitcoins offered for sale come mainly from two sources: Ryan Farace and Shaun Bridges.
Ryan Farace is a drug dealer who was sentenced in Maryland to 54 months in prison for manufacturing and distributing Xanax in exchange for bitcoins on darknet markets. He and his father attempted to transfer more than 2,874 bitcoins to a third party, in order to launder them in a foreign bank account.
Shaun Bridges is a former Secret Service agent who was involved in the investigation into Silk Road, the notorious website for the sale of illicit goods. He embezzled around 60 bitcoins belonging to the US government, which he transferred to exchange platforms to which only he had access. He was subsequently sentenced to 5 years in prison in 2015.
The two men have agreed to sell their bitcoins to the US authorities, who have filed a court application for the sale.
The sale of the bitcoins seized by the US government comes against a backdrop of increased regulation of cryptocurrencies in the United States. Under President Joe Biden, the US authorities have adopted a more hostile stance towards bitcoin and other decentralised digital assets.
Gary Gensler, head of the Securities and Exchange Commission (SEC), is known to be a proponent of strict regulation of cryptocurrencies, which he considers for the most part to be securities subject to SEC supervision.
In particular, he expressed his intention to regulate cryptocurrency exchange platforms, stablecoins and decentralised finance projects (DeFi), aimed at combating tax evasion and money laundering linked to cryptocurrencies.
Will the sale of bitcoins seized by the US government have an impact on the bitcoin market?
On the face of it, it is unlikely, as the volume of bitcoins put up for sale represents a tiny fraction of the total volume of bitcoin traded on exchange platforms. According to data from CoinMarketCap, the average daily volume of bitcoin traded is $16 billion, or around 456,000 bitcoins. The sale of 2,934 bitcoins by the US government therefore represents just 0.64% of this volume.
There are liquidation mechanisms in place to absorb variations in the supply and demand of bitcoins on the market, without significantly affecting the price.
The sale of bitcoins seized by the US government comes as no surprise to market participants, who are aware of the legal proceedings underway. It is therefore likely that this sale has already been anticipated and factored into the price of bitcoin.
Finally, it should be noted that the US government is not alone in holding bitcoins seized in legal operations. According to an estimate by CoinDesk, US federal agencies are in possession of around 194,188 bitcoins, worth $7.7 billion, accumulated through three major seizures. The first seizure involves 94,643 bitcoins linked to the Bitfinex hack in 2016, the second involves 69,369 bitcoins from Silk Road, and the third involves 51,326 bitcoins confiscated from James Zhong, a hacker also linked to Silk Road. These bitcoins represent around 1% of the total supply of bitcoins, which is limited to 21 million units.
If the US government decides to sell these bitcoins, it could have a bigger impact on the bitcoin market. However, it is possible that the US government could hold on to these bitcoins, hoping that they will increase in value in the future, or use them for strategic purposes, such as funding its covert operations.
The sale of 2,934 bitcoins by the US government, worth $118 million, is a move that comes against a backdrop of increased regulation of cryptocurrencies in the US. However, this sale is unlikely to have a significant impact on the bitcoin market, which has efficient liquidation mechanisms and anticipates movements in supply and demand.
On the other hand, it will be important to monitor developments in the stock of bitcoins held by the US government, which represents a significant proportion of the total supply of bitcoins. These bitcoins could be sold or used for various purposes, which could have consequences for the price of bitcoin and the security of the network.
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