U.S. Government’s $1B Bitcoin Transfer Investors; Bitcoin Dips
Early on Wednesday, after officials transferred some bitcoin to Coinbase-controlled accounts, the price of bitcoin fell below $22,000.
On Wednesday, U.S. authorities moved $1 billion in bitcoin (BTC) acquired from a dark web attack to new wallet addresses, one of which belonged to Coinbase, escalating investor concerns that strong sell pressures might lower the token’s price.
Data from blockchain security company PeckShield shows that the government shifted the bitcoin in three transactions. Over $41,000 worth of tokens were routed to government-controlled wallets, while almost 10,000 bitcoin were sent to Coinbase-controlled accounts.
Investors caught wind of PeckShield’s results when they were posted on Twitter early on Wednesday. In the hours following the publication of the article, investors voiced their concern that authorities would sell the stolen bitcoin on the open market, perhaps sinking the price of bitcoin, which has since rebounded from its two-year low of around $15,500 in November. Because of the worries, the price of bitcoin dropped by almost 2%, falling below $22,000.
An open market transaction would differ from how the government has always handled confiscated digital assets. Usually, seized property is sold by the government at auction. The government sold the bitcoin that it had taken from the proprietor of the online criminal market Silk Road in 2014 and 2015.
Conor Ryder, a researcher at the crypto markets research firm Kaiko, stated that although worries about the tokens’ sale on the open market may be exaggerated, suspicions that bitcoin values may decline are not wholly unfounded.
One has to question if bitcoin is due for some short-term headwinds since the transfer of Silk Road bitcoin to Coinbase is almost certainly being done with the goal to sell [the recovered tokens].
According to Mark Connors, head of research at 3iq, a digital asset management, the market’s ability to handle those stresses would largely depend on its makeup. In other words, how the market responds to a possible market-moving event will primarily depend on who the token holders are and how many tokens they own.
According to Connors, the market’s present makeup may help bitcoin withstand selling forces better than it did during last spring’s Terra fall. This is due to the market having less leverage than it had the previous year. It’s also because there are more investors holding wallets with more than $1,000 worth of tokens now than there were last year, when there were a lot more crypto-curious investors with much lower bitcoin holdings.
With the higher amount of push [in] the market now compared with the weaker hands and more leverage [that] defined the market a year ago], there should be a quicker bounce back if there is sell pressure.
Yet, the price of bitcoin may still change as soon as the government announces its intentions for the freshly transferred bitcoin. There are still many unknowns regarding the government’s plans for the tokens. If the bitcoin will be put up for auction by the government is yet unknown. Furthermore, it is unknown if the government will ever combine the holdings.