The U.S. Marshal service announced today that it will be auctioning off nearly 30,000 BTC seized from Silk Road accounts last year. Worth more than $17.5 million, the bitcoin will likely sell for a considerable discount from the market value. Interested parties must commit a refundable deposit of $200,000 from a U.S. bank by June 23.
The auction, which will take place over 12 hours on Friday, June 27, consists of nine blocks of 3,000 BTC and one block of roughly 2,656 BTC. The blocks represent only a portion of the 144,000 BTC seized by law enforcement agents during the raid on Silk Road’s operation, and do not represent any of the bitcoins held in addresses claimed by accused Silk Road administrator Ross Ulbricht.
Upon news of the auction, the price of bitcoin plummeted to around $565, with many fearing the impact of so many coins flooding the market. The price quickly rebounded to the $595 range over night, but concern about the sale’s impact on the overall bitcoin market may act to destabilize the price for weeks to come. With around 3,500 BTC being mined every day, the impact of these long-frozen coins entering the market may well put a downward pressure on the price, although just how many of them will ever make it to an exchange is anyone’s guess. With each block currently priced at around $1.7 million, the most likely buyers for the bitcoin are large institutional buyers. The coins are likely to sell at a considerable discount from the going rate.
One interesting angle on the sale is the very likely possibility of insider trading. Bitcoin’s price has been on a slightly downward trend for the last few days, but massive sell offs began to appear on major exchanges last night, sending the price down nearly $20 before the U.S. Marshals’ announcement. It’s not clear if insider trading on bitcoin would actually be illegal given the still-murky status of cryptocurrency under U.S. law, but it does hint that sources in the government have tipped off some of the major players in the bitcoin industry about the sale.