As the second-largest holder of Bitcoin after Satoshi Nakamoto, the US government has seen a profit of over $3.5 billion in the past three months as the cryptocurrency market heats up in 2023. With the possibility of a Bitcoin spot ETF being approved, will the US government take advantage of the situation to sell its Bitcoin holdings?
According to analysis by Dune, the US government currently holds at least $8.5 billion worth of Bitcoin, accounting for approximately 0.99% of the circulating supply. This is an increase from about $5 billion (with a profit of approximately $3.5 billion) just three months ago.
In the past, the US government has had a history of selling seized Bitcoin. Between November 2020 and 2022, a total of 207,189 BTC was confiscated in three different actions from cybercriminals and dark web markets. These Bitcoin holdings were primarily stored in encrypted, password-protected offline wallets controlled by the US Department of Justice, Internal Revenue Service, or other agencies. The specific details of the sources are as follows:
– November 2020 Silk Road seizure – 69,369 BTC, currently valued at over $3 billion.
– January 2022 Bitfinex hacker seizure – 94,643 BTC, currently valued at over $4 billion.
– March 2022 seizure from Silk Road hacker James Zhong – 51,326 BTC, of which the US government still holds 41.5K BTC.
The US government’s handling of these Bitcoin holdings has always been a topic of market concern, as any sell-off could potentially affect the price. In fact, the US government has indeed sold Bitcoin in the past. In February of last year, they sold 9,861 BTC that were previously owned by Silk Road on Coinbase, and announced plans to sell the remaining Bitcoin in batches within a year.
So far, less than 5% of the remaining Bitcoin has been sold, with an average price of $21,800 per BTC, resulting in a net profit of $215 million, approximately half of the current price. In July of last year, the US government also transferred 8,200 BTC worth $252 million to Coinbase, which is now worth up to $350 million.
The current status of the remaining Bitcoin holdings is still unclear, with only some possible executions.
With the rising price of Bitcoin, investors are now concerned whether the US government will take advantage of the potential approval of a Bitcoin spot ETF to sell off its holdings. In reality, the US government has been slow to convert Bitcoin into dollars in the past, indicating that they don’t seem to have any intention of HODLing but also haven’t sold during Bitcoin’s recent surge to make substantial profits.
Instead, the US government sees its large Bitcoin holdings as a byproduct of lengthy legal processes. Jarod Koopman, the Executive Director of the Cybercrime and Forensic Services Branch of the IRS, has previously stated:
“It’s not our goal to hold on to Bitcoin forever. We are not speculators. We are not investors. We are simply trying to liquidate assets in a way that’s responsible and compliant with the law.”
It remains to be seen whether the US government will take advantage of the current market sentiment to sell its Bitcoin holdings, especially if a Bitcoin spot ETF is approved.
(Source: Dune)