Auctioning Silk Road BTC Stash
Following the recent imprisonment of Ryan Farace, a Silk Road dealer involved in the distribution of Xanax, and his father, Joseph Farace, for their roles in a money laundering scheme, the government has revealed plans to liquidate over 2.9K BTC.
This information was first disclosed in a forfeiture notice on January 10 and subsequently circulated on social media. The decision to sell the seized digital assets is part of the legal consequences arising from the Silk Road case.
It is worth noting that the government’s decision to sell Bitcoin should not be interpreted as an indication of instability or skepticism in the broader crypto market. According to experts, it is a standard legal process for determining the value of assets confiscated during criminal investigations. They further noted that such actions have no negative influence on the Bitcoin ecosystem.
Silk Road BTC Sale Vs. GBTC Bitcoin Outflows
Despite concerns some crypto community members expressed about the prospect of a big Bitcoin “dump” due to the US authorities’ upcoming auction, experts see no reason to panic. Steven Lubka, Managing Director of Swan Bitcoin, indicated that the impact of the transaction would be less significant than the recent outflows from the Grayscale Bitcoin Trust (GBTC).
The Bitcoin advocate added that considering the enormous outflows that the GBTC has experienced in recent weeks, the US government’s planned BTC auction would have almost zero effect. Since its conversion to a spot Bitcoin exchange-traded fund on January 11, the Grayscale Bitcoin Trust has seen substantial outflows.
There have been sales of 106,575 BTCs, with the most recent outflow totaling 10,871 BTC occurring on January 24.
US Planned Bitcoin Sales
The US government’s projected sale of around $118 million in Bitcoin is a relatively modest fraction of their total Bitcoin holdings resulting from criminal seizures. According to data from crypto firm 21.co, the forthcoming sale accounts for only 1.5% of the government’s whole Bitcoin portfolio, estimated at 194,188 BTC or $7.7 billion based on current market rates.
It’s worth noting that the total amount controlled by the US government still represents less than 1% of Bitcoin’s circulation supply. The government’s Bitcoin holdings come from three major seizures: the 2016 Bitfinex hack led to the confiscation of 94,644 BTC in January 2022, the 69,368 BTC from the Silk Road investigation in November 2020, and another 51,325 BTC were confiscated from Silk Road hacker James Zhong.
Nevertheless, the United States government has taken a deliberate approach to selling these crypto assets. Approximately 41,000 BTC will be offloaded through four transactions. Meanwhile, the government has a history of Bitcoin auctions dating back to 2014, when venture capitalist Tim Draper purchased roughly 30,000 BTC.