The US government currently possesses bitcoin holdings valued at $5.5 billion, a significant asset in the world of cryptocurrencies. Whether it chooses to retain or divest this cryptocurrency stash could exert a considerable influence on the price of bitcoin.
Analysts report that Washington has confiscated a minimum of $5.5 billion worth of bitcoin since 2020. This substantial sum positions the US government as one of the prominent players in the crypto world, often referred to as a crypto “whale.” This term denotes individuals or entities that own substantial amounts of cryptocurrency.
The US government’s bitcoin holdings primarily consist of tokens seized from various sources, including cyber criminals. Notable contributions to its stash include tokens confiscated from the Silk Road online black market, holdings linked to James Zhong, the founder of Silk Road, and assets seized from criminals involved in the 2016 hack of the Bitfinex exchange, as reported by crypto firm 21.co.
Historically, the government has typically chosen to liquidate its cryptocurrency holdings through auctions following the conclusion of relevant legal proceedings. The funds raised from such auctions are often used to compensate victims of cybercrimes. For instance, Washington recently sold 9,861 previously-seized bitcoins through Coinbase in March, with $300,000 worth of compensation being provided to Bitfinex in July, according to the Wall Street Journal.
The potential sale of the government’s cryptocurrency holdings could significantly impact the price of the world’s largest cryptocurrency by total market capitalization. Over the past year, the cryptocurrency market has witnessed a decline in trading volumes. The digital asset sector experienced a downturn in 2022, attributed to the Federal Reserve’s aggressive interest rate hikes and the challenges faced by high-profile companies like FTX.
Bitcoin’s value plummeted below $20,000 and has struggled to recover, despite rallies in other risk assets this year. The cryptocurrency has traded within a narrow range of $26,000 to $31,000 since mid-March, characterized by lower volatility. This reduced volatility suggests that influential crypto “whales” can significantly sway the market on their own. Consequently, the US government’s decision regarding its $5.5 billion bitcoin holdings could have a substantial impact on the price and stability of bitcoin.
