U.S. Bitcoin Sales Could Have Cost Billions in Lost Gains

The U.S. has a history of selling Bitcoin at unfavorable times, potentially losing out on billions of dollars. Until recently, the U.S. government held more Bitcoin than MicroStrategy.

According to Arkham Intelligence, numerous confiscations following criminal crackdowns have resulted in the U.S. holding an impressive stockpile of 213,543 BTC, which is more than 1% of the total supply. MicroStrategy, which began adding Bitcoin to its balance sheet in August 2020, only surpassed this milestone in March.

While these figures might suggest that America’s vast BTC holdings reflect confidence in the crypto sector, it is crucial to note that the U.S. government is cautious about Bitcoin. American politicians, regulators, and law enforcement agencies have expressed concerns that Bitcoin could undermine the U.S. dollar and be used for criminal activities.

This significant stash mainly came from two major seizures. In late 2022, the Justice Department seized 50,676 BTC from a man who unlawfully took it from the Silk Road darknet marketplace. Some of these coins were hidden in a popcorn tin stored in a bathroom closet, an unusual hiding place.

Another major seizure occurred earlier that year when 94,000 BTC stolen from Bitfinex was confiscated from a couple later charged with money laundering.

These seizures raise a critical question: what should the U.S. do with all this crypto?

HODL or Auction?

Some American politicians have argued that the government should hold onto this crypto to allow it to appreciate in value. However, the U.S. began selling off BTC back in 2014, and data shows it hasn’t been very successful at it. Research by Jameson Lopp indicates that while the government has gained $366 million from sales, it could have missed out on $11.7 billion due to dramatic price rises in recent years.

For instance, a chunk of 50,000 BTC sold in 2014 for $19 million would be worth over $3.1 billion today. Typically, proceeds from these sales are split among federal agencies, police forces, and crime victims, with any remainder going back to the Treasury.

Despite the lack of a crystal ball, it’s evident that victims might have been better served if liquidations occurred a few years later. In March 2023, the government sold another 9,861 BTC related to Silk Road for $215.5 million, averaging about $21,853 per coin. Plans were in place to sell off roughly 40,000 BTC in four more batches throughout the year, but these transactions haven’t been finalized.

“If Bitcoin were to continue to perform as it has done in the past, by 2030 the U.S. stash of 210,000 BTC would start to rival their central bank’s holdings of gold, currently worth over $600 billion.”

Global Bitcoin Holdings

Other countries like China, the U.K., and Germany also hold close to $20 billion in BTC collectively. Recently, there has been nervousness that Germany might be close to staging some liquidations, as a large tranche of Bitcoin seized by the country has been moved to centralized exchanges. This has weighed on BTC’s spot price amid fears of increased selling pressure, coinciding with the imminent release of Mt. Gox payouts to creditors.

In an unusual twist, Bitcoin’s short-term price performance could be affected by the very governments it was designed to challenge.

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