Why is the U.S. government "reluctant to sell" its $5 billion worth of Bitcoin?
This is more likely to represent an inertia rather than a strategy.Original Author: Michael del Castillo, Forbes
Original Compilation: Luffy, Foresight News
As the U.S. government intensifies its crackdown on cryptocurrency businesses, it seems they have reached a point of intolerance towards cryptocurrencies. However, the other side of this love-hate relationship is that the Treasury holds 207,189 bitcoins, worth $5 billion, which is the largest government bitcoin holding in history.
According to a recent study by Forbes, while many other countries/regions are dealing with bitcoin, the U.S. government has been steadily increasing its bitcoin reserves through seizures. According to research by Sachin Jaitley, a general partner at investment consulting firm Morgan Creek Capital, the U.S. held 69,640 bitcoins last year, accounting for 94% of the total bitcoin held by governments worldwide, as per his study.
New York-based crypto analytics startup and Morgan Creek portfolio company Elementus provided data for its research by comparing events like the 2020 Department of Justice seizure of $1 billion in bitcoin with visible transaction records on the public bitcoin blockchain. According to Elementus' paper, "By leveraging public information provided by the media and the blockchain, Elementus was able to map the landscape of sovereign crypto wallets and update it over time."
By 2022, this research covered 11 countries that hold bitcoin. "All of this bitcoin is held by these government agencies," said Elementus CEO Max Galka. "But that doesn’t mean these governments only hold this bitcoin, nor does it mean that other governments haven’t used bitcoin."
By comparing these holdings with monetary supply information and inflation data over the past decade, 42-year-old Jaitley concluded, "As the money supply grows and concerns about inflation increase, the adoption rate of bitcoin at the sovereign level is also rising," he said, "therefore, there is a statistically significant relationship." The study does not include North Korea, as they stated they could not obtain inflation data from there.
According to data from blockchain analytics firm Elementus, the table shows bitcoin flows from 2013 to 11 countries in 2022. Most of the assets come from government seizures, and the information is incomplete.
This argument is not particularly rigorous. Firstly, according to data from software engineer and researcher Jameson Lopp, the U.S. sold $366 million worth of bitcoin in 11 auctions from 2014 to 2023. On the other hand, the government has clearly never purchased bitcoin, so while retaining most of the bitcoin may be intentional, there has never been an intention to buy bitcoin. Additionally, data from Lopp indicates that selling could lead to a potential appreciation loss of $4.8 billion.
While Jaitley believes that government ownership of bitcoin is a means to hedge against inflation, given the scale of the U.S. government's balance sheet, a $5 billion reserve is unlikely to provide any meaningful hedge. German federal prosecutor Jana Ringwald stated that in Germany, immediate sale of seized assets is not mandatory. She said, "It is 100% certain that some items will be seized that have not yet been sold," and that "the prosecutor may order an 'emergency sale,' but may also choose not to do so."
Leslie Sammis, a criminal defense attorney in Tampa with experience in several Binance seizure cases, stated that DOJ bureaucrats are more likely waiting for the overall situation of cryptocurrencies to become clearer. "I think they may decide they need congressional legislation or some policy from the DOJ to transfer all these assets," Sammis said.
Forbes TechCrunch contacted the U.S. Marshals Service and the DOJ Office of Inspector General to confirm the exact amount but has not yet received a response.
