Major Sell-Off Imminent? US Gov Transfers $1.9B In Seized BTC to Coinbase Prime
- The US government yesterday transferred 19,800 BTC, valued at just under US$2 billion, to Coinbase Prime, potentially indicating a plan to sell.
- The BTC are part of a huge haul the US government seized as part of its criminal proceedings against the now-defunct illicit online marketplace, the Silk Road.
- Historically large government sales of Bitcoin have triggered market sell-offs, such as when the German government sold earlier this year — for now though the BTC price remains stable.
The US government yesterday transferred 19,800 Bitcoin (BTC), valued at just under US$2 billion (~AU$2.9b), to Coinbase Prime, leading many to believe its planning a large sale — potentially sparking a drop in Bitcoin’s price. The transferred Bitcoin was seized as part of the criminal proceedings against the illicit marketplace, the Silk Road.
The transfer came from a wallet tagged as ‘U.S. Government: Silk Road DOJ Confiscated Funds’ by the blockchain analytics firm, Arkham Intelligence.
Related: Chainalysis Report Exposes Myths on Crypto’s Role in Crime
Fears Government Sale Could Trigger Sell-Off
Usually, when governments transfer large amounts of crypto to a centralised exchange it indicates a big sale is incoming. Often when governments do sell, like the German government did earlier this year, it destabilises the crypto market and triggers large-scale sell-offs.
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However, so far the news of the US government’s transfer hasn’t had much of an effect on the market. At the time of writing, Bitcoin was down only 2.2% on the day according to CoinGecko, changing hands for just under US$96,000 (AU$148k).
Even after transferring this latest tranche of Bitcoin to Coinbase, the US government continues to hold over US$18 billion (AU$27.8b) worth of cryptocurrencies it has seized as part of criminal cases.
The US Government’s Seized Crypto Sales Strategy
The transferred Bitcoins are part of the over 50,000 Bitcoin the US government seized from James Zhong when he was arrested in 2022. Zhong later pleaded guilty to wire fraud after the government charged him with illegally manipulating Silk Road’s payments system in 2012.
In October the US Supreme Court cleared the way for the Bitcoin seized from the Silk Road to be sold when it declined to review a case concerning its ownership.
The last known US government sale of some of the Silk Road BTC came in March of 2023, when around 10,000 BTC were sold for approximately US$216 million (AU$334m). In the filings for that sale the government laid out its plan to sell the remaining Bitcoin throughout 2023, but no sales have been identified.
Related: Coinbase Partners with US Marshal Service for Enhanced Crypto Custody Solutions
In July of this year, the US Marshals Service, which is part of the US Department of Justice, announced that it has partnered with Coinbase Prime as part of its strategy to custody and sell “large quantities of popular cryptocurrency assets, known as Class 1 cryptocurrencies”. Class 1 cryptocurrencies is bureaucrat-speak for large market cap crypto like Bitcoin and Ethereum.
