US govt’s planned $118M Bitcoin sale is ‘peanuts’ compared to GBTC

The United States government’s planned sale of nearly $118 million in seized Silk Road Bitcoin (BTC $39,909) shouldn’t be seen as a cause for concern, according to market commentators.

A Jan. 10 forfeiture notice, which made rounds on social media on Jan. 24, shows that the government plans to dispose of the 2,934 BTC following the Jan. 8 sentencing of Silk Road Xanax dealer Ryan Farace and his 72-year-old father Joseph Farace for money laundering conspiracy.

While a few members of the community shared concerns the auction could lead to a multimillion-dollar “dump” of Bitcoin, Steven Lubka, managing director at Bitcoin exchange Swan Bitcoin, was among many who argued the sale would be “peanuts” compared to the outflows from the Grayscale Bitcoin Trust over the last week.

“Peanuts, we have been eating GBTC sales 4x this for breakfast,” said Lubka.

The GBTC has sold 106,575 BTC worth $4.2 billion since it converted to a spot Bitcoin exchange-traded fund on Jan. 11, with the latest outflow being 10,871 BTC on Jan. 24.

The U.S. government’s planned sale is also just 1.5% of the total estimated 194,188 BTC or $7.7 billion it holds from three seizures it made in criminal cases, according to data from crypto firm 21.co. This, in total, is still less than 1% of Bitcoin’s circulating supply.

The three Bitcoin hauls and sales by the U.S. government are:

1. 94,643 BTC seized in January 2022 from the 2016 Bitfinex hack.

2. 69,369 BTC seized in November 2020 from the Silk Road.

3. 51,326 BTC seized from Silk Road hacker James Zhong.

Around 41,000 BTC was due to be offloaded in four sales throughout 2023.

The U.S. government has been known to sometimes auction Bitcoin, the most notable being the 2014 purchase by venture capitalist Tim Draper, who scooped up nearly 30,000 BTC in an auction.

More recently, the government has moved to sell seized crypto on exchanges instead of auctions, with the last known sale of 9,118 BTC in March 2023.