69,000 bitcoins for sale? What impact does the Silk Road selling coins have on the market?

Author: shushu, BlockBeats

Just ten days after the U.S. government once again pledged $6 billion in military security assistance to Ukraine, the U.S. Department of Justice is preparing to initiate the liquidation of a substantial amount of Bitcoin assets.

On January 9, an official confirmed to DB News that the Department of Justice has been authorized to dispose of 69,370 Bitcoins seized in connection with the infamous Silk Road case. This asset currently has a market value of approximately $6.5 billion.

It is reported that the Department of Justice requested permission to sell these assets, citing Bitcoin price volatility. When asked about the next steps, a DOJ spokesperson stated, "The government will proceed based on the ruling in this case."

Following the news, Bitcoin dropped over 2.5% within 24 hours, and as of the time of writing, the price is $94,400.

One of the Most Influential Milestones in Bitcoin History: Silk Road

In October 2013, a young man named Ross Ulbricht was arrested in a library in San Francisco, using the alias "Dread Pirate Roberts" (DPR). This marked the end of the notorious drug and weapon trading website, Silk Road. In 2015, Ross Ulbricht was sentenced to life in prison.

Launched in 2011, this dark web platform initially provided a marketplace for various illegal goods and services, such as drugs, fake documents, and hacking tools, in a "eBay-like model." Due to the anonymity of the dark web and Bitcoin as the primary payment method, Silk Road rapidly grew and was regarded as one of the most famous and largest illegal markets on the dark web.

From 2012 to 2013, U.S. law enforcement agencies, including the FBI and DEA, began closely monitoring Silk Road and secretly deployed undercover agents. Due to the platform's frequent and large-scale transactions, as well as its involvement in illegal activities across multiple countries, U.S. law enforcement made it a key target for crackdown.

During the investigation of the Silk Road case, the FBI seized approximately 170,000 Bitcoins from the platform's servers and Ross Ulbricht's personal digital wallet, making it one of the largest Bitcoin law enforcement seizures in history.

When arresting Ross Ulbricht, law enforcement gained access to relevant encrypted wallets through the seized laptop and server information. Since Bitcoin transactions require a private key for transfer, once law enforcement obtains a valid private key, they can transfer the corresponding Bitcoins from the suspect's address to an official "custodial" wallet.

The U.S. Government is Not Selling Bitcoin for the First Time

Since 2014, the U.S. government has auctioned off Bitcoins seized from the Silk Road case multiple times, and the timing and impact on market prices are worth reviewing.

In June 2014, the U.S. government held its first public auction of Bitcoins seized from Silk Road. The U.S. Marshals Service auctioned approximately 30,000 Bitcoins. Bidders included many investment institutions and individuals, with well-known investor Tim Draper winning multiple bids. In subsequent auctions, the government sold the remaining Bitcoins in batches.

After the auction, Bitcoin prices remained stable around $600 without experiencing a "collapse." The active bidding by institutional investors during the auction helped reinforce Bitcoin's "legitimacy."

In December 2014, a second auction of 50,000 Bitcoins, nearly double the size of the first auction, was met with similarly pessimistic market expectations. However, after the auction concluded, Bitcoin continued to fluctuate between $300 and $400 without a significant drop.

In March 2015, another 50,000 Bitcoins were auctioned, and by this time, Bitcoin had recovered from its previous lows. The prior panic in the market further diminished, and prices stabilized after slight fluctuations between $280 and $300.

By November 2015, the hundreds of thousands of Bitcoins auctioned by the U.S. government throughout the year did not trigger significant market turmoil. On the contrary, the ongoing competitive bidding from buyers was interpreted as a symbol of Bitcoin gradually gaining more "legitimate investment" status.

To this day, the U.S. Department of Justice has been authorized to liquidate the remaining seized 69,370 BTC (valued at approximately $6.5 billion) from the Silk Road case, with the wallet address marked as "bc1qa5" having remained dormant for over four years.

Based on past selling history, Bitcoin prices may experience a brief period of price panic, but in the long run, due to the U.S. government's previous practice of OTC auctions, it is unlikely to sell at market prices, and the negative impact on Bitcoin prices will not last long.

Trump's Pardon and Bitcoin Reserve Commitment May Delay Sale?

In May 2024, during his presidential campaign, Trump promised at the Libertarian National Convention in Washington, D.C., that if he is re-elected, he would commute the sentence of Silk Road founder Ross Ulbricht on his first day in office. On July 28, during the Bitcoin 2024 conference, Trump reiterated his commitment to reducing Ross Ulbricht's sentence if he is elected president.

On November 14, Ross William Ulbricht posted on the X platform for the first time after the U.S. elections, stating, "I sincerely thank everyone who voted for President Trump. I believe he will fulfill his promise and give me a second chance. After spending over 11 years in darkness, I finally see the light of freedom at the end of the tunnel. Thank you very much."

As of now, the bet on PolyMarket regarding "Will the U.S. government sell Bitcoin before Trump takes office?" has become a hot topic, with a betting volume of $136,310 and a 22% probability of selling Bitcoin before Trump's inauguration.

Given that Trump previously promised to commute Ross's sentence and has repeatedly stated that he will make the U.S. the world's cryptocurrency capital and embrace cryptocurrencies, most people believe that Ross may be granted a reduced sentence or even a pardon. Similarly, the probability of Ross being pardoned in the betting topic "Who will be pardoned within 100 days of Trump's inauguration?" is currently very high, with a 73% probability of pardon.

Due to Trump's Bitcoin reserve commitment, if the U.S. government does not sell before January 20, when Trump officially takes office, market speculation suggests that the Bitcoins seized in the Silk Road case may not be sold.

How Much Bitcoin Does the U.S. Government Hold?

According to data from Bitcoin Treasuries, the U.S. government holds 207,189 Bitcoins, accounting for 0.987%. Based on the current Bitcoin price, the total value of the Bitcoins held by the U.S. government is $19,544,018,200.