As the second-largest holder of Bitcoin after Satoshi Nakamoto, the US government has made substantial gains of over $3.5 billion in the past three months as the cryptocurrency market heats up in 2023. With this favorable market condition, there is speculation as to whether the US government will sell off its Bitcoin holdings under the sentiment of a potential approval of a Bitcoin spot ETF.
According to Dune analysis, the US government currently holds at least $8.5 billion worth of Bitcoin, accounting for approximately 0.99% of the circulating supply. This is an increase from $5 billion just three months ago, resulting in a profit of approximately $3.5 billion.
The US government has a history of selling off Bitcoin. Between November 2020 and 2022, a total of 207,189 BTC was confiscated in three separate actions from internet criminals and the dark web market. These Bitcoins were primarily stored in encrypted, password-protected offline hardware wallets controlled by the US Department of Justice, the Internal Revenue Service, or other institutions. The specific details of the sources are as follows:
– November 2020 Silk Road seizure – 69,369 BTC, worth over $3 billion.
– January 2022 Bitfinex hacker seizure – 94,643 BTC, worth over $4 billion.
– March 2022 Silk Road hacker James Zhong seizure – 51,326 BTC, of which the US government still holds 41.5K BTC.
The US government’s handling of these Bitcoins has always been a topic of market concern, as any sell-off could impact the price. In fact, the US government has indeed sold Bitcoin in the past. In February of last year, officials sold 9,861 BTC previously owned by Silk Road on Coinbase, with plans to sell the remaining Bitcoins in batches within a year.
Less than 5% of the remaining Bitcoins have been sold since then, with an average price of $21,800 per Bitcoin, resulting in a net profit of $215 million, approximately half of the current price. In July of last year, the US government transferred 8,200 BTC worth $252 million to Coinbase, now valued at $350 million.
Currently, the trading status of the remaining Bitcoins is still unclear, with only a portion potentially executed.
With the recent rise in Bitcoin prices, investors are concerned whether the US government will take advantage of the sentiment surrounding the potential approval of a Bitcoin spot ETF to sell off its holdings. Historically, the US has been slow in converting Bitcoin to USD, indicating that the government does not seem to have a HODL strategy but also refrains from selling during Bitcoin’s rapid surge to gain substantial profits.
Instead, the US government views its significant Bitcoin holdings as a byproduct of lengthy legal proceedings. Jarod Koopman, the Executive Director of the IRS Criminal Investigation Division, has previously stated that the government’s Bitcoin holdings are more like a derivative of the complex legal process.
In conclusion, while it remains uncertain whether the US government will sell off its Bitcoin holdings, the possibility exists given the current market conditions and the potential approval of a Bitcoin spot ETF.