Author: big cousin
Editor: Dino
This article is jointly completed by Shilian Finance and Niubite (niubite.com) market analysis cooperation. Niubite focuses on blockchain project investment research, secondary analysis and mainstream transactions.
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Recently, Grayscale has been selling Bitcoin at an average rate of more than 10,000 per day, causing the crypto market to plummet.
After several days of continuous sales, the market has slowly become accustomed to Grayscale’s rhythm, and Bitcoin’s price fluctuations are increasingly less affected by Grayscale’s sales.
However, the U.S. government has also begun to crack down on the market.
According to a notice filed by U.S. officials, it plans to dispose of nearly 2,875 Bitcoins seized from Ryan Farace and Sean Bridges during the dark web Silk Road law enforcement operation, worth approximately $117 million.
According to statistics, among the categories of Bitcoin holders, the number of Bitcoins held by national governments exceeds 450,000.
Among them, the U.S. government holds the largest number of Bitcoins, with a conservative estimate of more than 200,000, accounting for almost 1% of the total supply of Bitcoin.
It is precisely because the U.S. government holds a large amount of Bitcoins, coupled with the status of the U.S. dollar in the global economic system, that every time the U.S. government sells Bitcoins, it attracts market attention and is even regarded by some investors as the basis for Bitcoin transactions. "wind vane".
Where did the U.S. government’s Bitcoin holdings come from? How is the U.S. government sold? What impact will it have on the market?
1. The U.S. government holds more than 200,000 Bitcoins
As one of the largest Bitcoin holders in the world, the U.S. government obtains the Bitcoins it holds. Was it purchased openly on the market? of course not.
The Bitcoins held by the U.S. government are mainly seized from cybercriminals and darknet markets.
These seized Bitcoins or other cryptocurrencies are stored offline in hardware wallets controlled by the U.S. Department of Justice, the U.S. Federal Tax Service, or other agencies.
How many Bitcoins does the U.S. government hold?
According to 21.co’s analysis of public documents, the U.S. government has obtained more than 200,000 Bitcoins through the last three seizures alone. Based on the current Bitcoin market price, the market value has exceeded US$8 billion.
The Bitcoins held by the U.S. government were mainly obtained through three seizures.
Case 1: Silk Road Seizure in November 2020 (69,369 BTC)
In 2010 the Silk Road website was named for its popularity in using Bitcoin for transactions, but the platform had many sellers selling illegal items, and in 2013 founder Ross Ulbricht was arrested and sentenced to life in prison.
In 2020, founder Ross Ulbricht agreed to give up ownership of 69,369 Bitcoins and hand them over to the U.S. government.
Case 2: Bitfinex hacking incident (94643 BTC)
In August 2016, the veteran exchange Bitfinex suffered one of the largest hacking incidents in history. As many as 119,756 Bitcoins were stolen by hackers, which was worth US$71 million at the time and currently has a market value of US$4.8 billion.
In February 2022, the U.S. Department of Justice announced that an American couple was arrested by the police on suspicion of stealing Bitcoins in the xiqian Bitfinex hacking incident, and more than 94,000 Bitcoins were frozen.
Case 3: James Zhong seizure case in March 2022 (51326 BTC)
James Zhong is suspected of illegally obtaining more than 50,000 Bitcoins through the black market in 2012. The U.S. Internal Revenue Service (IRS) raided James Zhu’s home in Gainesville in November 2022 and confiscated 50,000 Bitcoins.
Through the above three cases alone, the U.S. government has obtained more than 200,000 Bitcoins. Of course, this is only a "minimum estimate." In fact, the actual number of Bitcoins held by the U.S. government may be much higher than this number.
2. The process of the U.S. government liquidating Bitcoin
As one of the institutions holding the largest number of Bitcoins, the U.S. government has always been paying close attention to how it handles the Bitcoins in its hands.
After all, 200,000 Bitcoins is not a small amount. If the U.S. government sells them all, the price of BTC will be hit hard. Moreover, if the U.S. government sells them, some people will choose to follow suit and sell, which will have a negative impact on the crypto market. greater impact.
Unlike other Bitcoin holders, the U.S. government’s attitude towards Bitcoin does not seem to pay much attention to the rise and fall of prices. After all, it is obtained through inspection and confiscation, rather than buying it with real money. No monetary cost was incurred.
Therefore, the U.S. government obviously does not intend to be a long-term holder. It is not waiting for the price of Bitcoin to "rise to the sky" before selling, and it may not have an investment plan.
In contrast, the U.S. government has been surprisingly slow to convert these Bitcoins into U.S. dollars.
Because the long legal process from seizing Bitcoin to selling it for U.S. dollars is likely to take several years.
Therefore, the Bitcoins remaining in U.S. government accounts are actually a byproduct of a lengthy legal process.
According to U.S. legal procedures, when U.S. government agencies seize illegal cryptocurrencies, they do not immediately acquire ownership of the assets.
Only after a court finally issues a forfeiture order can the government formally take ownership of that portion of the cryptocurrency and hand it over to the primary agency responsible for liquidating seized assets, such as the U.S. Marshals Service.
The U.S. government will keep the cryptocurrencies as evidence or proceeds of crime pending a final verdict in the case.
"Governments are often very slow to process these assets because they have to do a lot of due diligence, the cases are often complex and there's a lot of red tape," said Nicolas Christin, a professor of computer science at Carnegie Mellon University.
Therefore, it often takes several years for U.S. government agencies to seize, seize, and then sell Bitcoin.
However, this is actually beneficial to the US government. After all, the price of Bitcoin may have doubled many times in a few years.
For example, when Bitfinex was hacked in 2016, the price of Bitcoin was only $600, but by 2022, when the U.S. Department of Justice announced the seizure of 95,000 Bitcoins, the price of BTC had reached $44,000. The price difference has increased by 73 times. In 6 years, the price has skyrocketed by 73 times. The cumbersome process has brought more benefits to the US government.
3. The evolution of the liquidation form of the Judicial Police Office
The U.S. Marshals Service’s liquidation procedures for cryptocurrencies such as Bitcoin are also constantly evolving with the development of the cryptocurrency industry.
In the early days of the development of the cryptocurrency industry, the U.S. Marshals Service mainly used the traditional method of holding auctions to convert seized and confiscated Bitcoins into U.S. dollars, and some buyers also made very good profits as a result. .
For example, the famous venture capitalist Tim Draper is one of the beneficiaries of the auction.
In 2014, Tim Draper purchased more than 30,000 Bitcoins from the U.S. government through two auctions. At that time, the cost of one Bitcoin was about $600, and he made a huge profit.
As the cryptocurrency industry continues to develop, the U.S. Marshals Service’s liquidation format has also begun to shift from public auctions to sales on exchanges.
For example, in January 2021, the U.S. Marshals Service decided for the first time to liquidate some seized digital currency positions on cryptocurrency exchanges.
In March last year, the U.S. government sold 9,861 Bitcoins through the cryptocurrency exchange Coinbase.
"Our goal is to dispose of assets promptly and for fair market value," a Marshals Service representative said.
Judging from the history of the liquidation of the Judicial Police Department, it has basically been sold in batches, not all at once. The reason for adopting this form is to avoid the adverse impact of a large number of sales orders on the market.
In its current approach, the Marshals Service has also taken additional measures to ensure that the market will not be significantly affected, including liquidating cryptocurrencies within a longer time window.
In many cases, government sales proceeds are used to compensate victims, and government agencies investigating crimes may also request that the proceeds be used to pay for law enforcement costs.
Generally speaking, judging from the U.S. government’s liquidation process and sales situation of Bitcoin, it will not have a big impact on the market. Moreover, the cryptocurrency market is already very large, and the number of batches sold by the U.S. government , the market can basically digest it.
P.S This article does not constitute any investment advice
