US Government Preparing to Sell More Silk Road Bitcoin
The US Marshals Service (USMS) is reportedly preparing to auction off another batch of Bitcoin seized from the now-defunct Silk Road marketplace.
Silk Road was an online black market that operated from 2011 to 2013. It was the first major marketplace to use Bitcoin as its currency, and its founder, Ross Ulbricht, is currently serving a life sentence for his role in its operation.
The US Department of Justice (DOJ) seized a large amount of Bitcoin from Silk Road in the course of its investigation. In March 2023, the USMS auctioned off a portion of this Bitcoin, selling just over 9,861 BTC worth $216 million.
According to data from researcher Jameson Lopp, the USMS, whose mandate is to sell off assets confiscated in criminal investigations, has helped the US government sell 195,000 BTC so far.
Now, recent on-chain data analysis suggests that the USMS may be preparing to sell another tranche of Silk Road Bitcoin. Arkham Intelligence first identified on-chain data showing a test transaction of 0.001 BTC, from a stash of 30,174 BTC worth $2 billion, that was sent to Coinbase.
This could be a sign that the government is preparing to move these funds to a platform where they can be easily sold.
Potential Price Tremors?
The potential for a sizeable Bitcoin sell-off has stirred volatility in the market. Some investors fear such a large injection could depress Bitcoin's price, which currently stands at around $66,000. However, considering the overall size of the Bitcoin economy, others believe the impact might be minimal.
History offers mixed results when it comes to government Bitcoin auctions. In December 2017, government agencies attempted to capitalize on Bitcoin's near-$20,000 price tag by selling some holdings. However, by the time approvals were secured in January 2018, Bitcoin prices had nearly halved, resulting in a potential missed opportunity.
The impact of the USMS sale will likely hinge on several factors, including market sentiment, sale strategy, and buyer demand – strong institutional or retail interest could help offset any potential price dip.
DOJ's seizure of Silk Road BTC
In December 2022, the DOJ said it confiscated of $3.36 billion (at the time) worth of BTC from an individual who stole it from the now-defunct darknet website Silk Road.
According to the DOJ, James Zhong used nine Silk Road accounts to trigger over 140 transactions to trick the market’s withdrawal-processing system into releasing 50,000 BTC to his accounts.
Officials said that the BTC were found in hard drives dotted around Zhong’s home in Gainesville, Georgia.
“For almost 10 years, the whereabouts of this massive chunk of missing bitcoin had ballooned into an over US$3.3 billion mystery. We won’t stop following the money…even to a circuit board in the bottom of a popcorn tin,” US attorney Damian Williams said at the time.