DOJ’s $6.5B Bitcoin Sale: Shocking Silk Road Impact Unveiled

Key Takeaways

• DOJ’s $6.5B seized Bitcoin is yet to be moved, creating speculation around its potential market impact.
• Bitcoin sees a 13.5% drop from its $108K peak, driven by short-term holder losses.
• OTC sales minimize impact, while market sales could shake prices further.

The Department of Justice has been approved to sell 6.5 billion dollars’ worth of Bitcoin stemming from the Silk Road case. However, 69,370 BTC are still left unsold, though the BTC price has come under big pressure as it fell back 13.5% from the all-time high of $108,000, currently changing hands at $93,500. For the year, this cements the largest drop and really points out the volatility on short-term holders.

Source: CryptoQuant

This includes 36,400 BTC sent to exchanges by short-term holders in the last 24 hours alone, mostly at a loss as represented by the Spent Output Profit Ratio (SOPR) below 1. Long-term implications of the possible DOJ sale seem relatively negligible in light of the surging Bitcoin realized market capitalization, which increased by $381.7 billion over the last year.

Source: CryptoQuant

Bitcoin’s Price Faces Significant Drawdown

The impact of selling the Silk Road coins depends heavily on the method used. If sold through Over-the-Counter (OTC) transactions, the market would experience minimal disruption. Conversely, exchange-based sales could trigger volatility, as seen during Germany’s sale of 50,000 BTC in mid-2024, which shook Bitcoin’s price.

The announcement has come amid speculations over the timing of the sale, when only some weeks are left before a new US administration takes over the White House. The strategic advisors have questioned if the Treasury could retain the seized Bitcoin as a reserve currency. However, such a move does not align with the present US laws and DOJ policies.

Legal and Policy Hurdles

Analyst Carlo pointed out that although the DOJ typically converts seized assets into U.S. dollars for clarity, the Silk Road Bitcoin sale has taken much longer than expected due to various legal disputes over the assets. For instance, ownership claims by entities like Battle Born Investments needed to be sorted out in court before liquidation could take place.

Of course, the thought of holding Bitcoin in some form of strategic reserve is further convoluted by a set of policies in existence. Any such step will be needed via legislation or through an executive order so as to cut across guidelines issued by the DOJ. While there is a suggestion of looking into Bitcoin reserves, the prevailing legal landscape supports the liquidation against holdings in volatility-prone crypto assets.

While the Silk Road Bitcoin sale by the DOJ will have near-term implications, its long-term implications on the market are subdued. It is not known whether crypto policies will be reviewed by the incoming administration, but any significant changes will need unprecedented legislative or executive initiatives.

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