U.S. Government to Auction $4.4 Billion in Bitcoin—Will Prices Tumble?

• The U.S. Supreme Court declined to hear a case over 69,370 Bitcoin seized from Silk Road, clearing the way for the government to sell it.

• Battle Born Investments had claimed rights to the Bitcoin but lost in lower courts, with the Supreme Court’s refusal marking the end of the legal fight.

The United States Supreme Court has declined to hear the case involving the ownership of 69,370 Bitcoin seized from the notorious Silk Road marketplace.  This decision, made on Monday,  allows the US government to dispose off the cryptocurrency worth $4.38 billion, which was seized in 2022.

The case began when the Nevada-based company known as Battle Born Investments sought to lay claim to the confiscated Bitcoin. Battle Born claimed that it bought the rights from the bankruptcy of Raymond Ngan, whom the company identified as “Individual X”, the man who allegedly stole billions of dollars worth of Bitcoin from Silk Road before the government could seize them.

U.S. Government Transfers Seized Bitcoin and Prepares for Sale

In 2022, the federal court in California dismissed Battle Born’s claim, stating that there was no proof to suggest that Ngan was “Individual X.” The federal appeals court in San Francisco also supported the ruling that Battle Born had no right to the Bitcoin in question. With the Supreme Court’s decision to not accept the case, it seems that the legal battle has come to an end and the government can now proceed to wind down the cryptocurrency.

The U.S. government has already made moves suggesting its plan to sell off the seized Bitcoin. Recently, a substantial amount of Bitcoin linked to Silk Road has been transferred to new wallets, pointing towards a sale. More than $2.6 billion worth of Bitcoin was transferred in July and August alone.

Some of these transfers could be associated with Coinbase Prime, a platform with which the US Marshals Service has been working, and some of these moves have sparked concerns over market manipulation risks. Historically, when governments decided to sell off huge amounts of Bitcoin, the value of the cryptocurrency declined. 

Yes, US Marshal Service (USMS) is almost certainly selling silk road bitcoin. Joey is right (at least in the present). USMS has been sending BTC to a custodial address required by the terms of the servicing agreement that USMS entered into with Coinbase in June. Given the…

— Scott Johnsson (@SGJohnsson) August 16, 2024

Another instance of this was witnessed earlier this year when the German government decided to dispose of almost 50,000 BTC, which led to a fall in Bitcoin prices. If the US goes ahead with the sale, the same pressure to push down the Bitcoin prices is anticipated.

Political Debate Over Seized Bitcoin

The question of what the U.S. government should do with seized Bitcoin has emerged as a subject of discussion on the political stage. In July, Trump announced at a cryptocurrency conference in Nashville that he would maintain the policy of not spending the government’s Bitcoin if re-elected.

He also proposed creating a “strategic Bitcoin stockpile,” a departure from the current administration’s approach to handling cryptocurrencies. The former president’s position has raised the question of whether the government should continue to sell Bitcoin or keep it as an asset. According to Bitcoin Treasuries data, the US government currently has 203,239 BTC.