The United States government is believed to be currently holding more or less two hundred thousand bitcoins valued at 6 billion dollars. Last March 2023 the government owned wallet has transferred 1 billion dollars which caused the price of BTC and other cryptocurrencies to crash. These were recovered bitcoins from criminals especially those involved in Silk Road which is a blackmarket in the dark web as well as bitfinex hacking incident .
By the way I've recently published an article on China's lead in CBDC. You can read about it by clicking here
It is important to note that nobody knows for sure how much in total the US government truly holds in Bitcoin. Some seizures of bitcoin assets may not have made it to the headlines while those that did may have been under reported. Like the case for alphabay (another dark net marketplace) which was bigger than silk road but surprisingly the amount confiscated was smaller. And there could also be undisclosed wallets owned that could be holding more which is not known to the public. If theories are to be believed it is said that the total holdings would actually be over 500K. they could also be in possession of not just bitcoin but other cryptos like Ethereum
There are different speculations in regards to the interest of the government to own bitcoin but I am pretty certain it is 1. for national security as it could digitally track down funds that are used for illegal activities such as money laundering or drug trafficking and 2. They likely want the benefits crypto has to offer financially.
Going back to topic, following the sale of crypto last March 2023, the US Gov't has made the announcement that it will sell of another 40K Bitcoin in 4 tranches before this year ends. So 4 more sales of 10K btc each. And just recently they moved 10K bitcoin in early August. This could result into another bear market
Now there are many possible outcomes on how these sales could affect the price of cyrpto and would primarily depend on how these transaction are conducted.
If the sale is done over-the-counter then there could be less impact on bitcoin's price. This is because the transaction will be made outside of formal exchanges and directly between the buying and selling parties. In practice this is done as the coins can be acquired at a discount without making much of an influence on the market price.
However if the sale is made thru an auction, even if it's an over the counter transaction the winning buyers could sell off on their existing bitcoins to easily make a profit as they have acquired the coins from auction at a discount. This would result in a crash or decline in value.
In the same manner, selling Bitcoin directly on the market thru an exchange would almost certainly guarantee a crash. The sudden increase in supply if unmatched by demand of buyers would send the price of bitcoin spiraling down. And the US government is certainly a market mover with the amount of bitcoin they have in possession.
So what do we actually expect to happen? Well there's the good, the bad and the ugly. Best case scenario is that an over the counter transaction will be done thru auction, where the auctioned off bitcoin will be sent to an entity or individual who does not plan to sell everything off so suddenly. This is possible as they have already traded for the coins at a discount, and if they are not looking for a quick dump and just slowly sell to public then the markets could remain relatively stable.
The bad part, is like those mentioned above. Suddenly moving huge amounts of bitcoin and selling it on the market would almost certainly guarantee a market crash price. Many have been waiting for a bull market and this events could just cause the exact opposite.
If conspiracy theory is to be believed, then this would be the nail to the coffin in cyrpto as we now it today. This could happen if events, announcements, and the selloff would be deliberately timed simultaneously to cause a market crash. For for example, news of Blackrocks ETF application will be denied, then followed by an announcement that allegations on Binance were found to be true. Shortly after will be the sudden and significant increase of bitcoins being sold on the market. This would certainly spell disaster.
Personally I am hoping for the best. It is all speculative for now. And me not being an expert the best way I could think of is to simply diversify.
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