Bitcoin (BTC-USD) fell around 2% on Thursday as fears grew over whether the US government would sell the 69,370 bitcoins it seized from the Silk Road market. Traders fear that a sudden influx of such a large quantity of bitcoins could disrupt the market in the short and long term.
The price of Bitcoin was $60,900 (£46,597) on Thursday, according to CoinGecko data. The broader cryptocurrency market has also seen a slowdown, with the total market capitalization falling 3% in the past 24 hours to $2.22 billion (£1.70 billion).
Supreme Court ruling paves way for Bitcoin sale
The U.S. Supreme Court on Monday declined to hear an appeal in a case involving ownership of Silk Road’s 69,370 bitcoins, seized from the now-defunct online black market. The decision confirms an earlier decision from 2022, which allows the US government to auction bitcoins, valued at around $4.4 billion at current prices.
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The appeal was filed by Battle Born Investments, which had failed to convince a district court in 2022 and an appeals court in 2023 that it had acquired the bitcoin through an application for bankruptcy protection. bankruptcy.
Monday’s denial of a review of the case cleared some of the final legal hurdles, allowing the U.S. government to move forward with a potential sale of its bitcoin reserve.
Impact on the crypto market
Ryan Lee, chief analyst at Bitget Research, noted that a large-scale sale of Bitcoin, especially at government auctions, could create significant volatility in the market.
“Large-scale bitcoin sales like this often trigger market fluctuations,” Lee said. “If the government sells bitcoin in one fell swoop, market sentiment could change dramatically, leading to a wave of selling and a temporary decline in the price of bitcoin.”
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Lee also highlighted the psychological pressure placed on investors. “Some investors may worry that the influx of these bitcoins will put downward pressure on prices, especially if they are sold in the open market. Investors could adjust their positions in advance to avoid risks, potentially amplifying short-term volatility,” he said.
However, Lee suggested that if bitcoins are sold in stages, the market could absorb them more easily. “With more institutional investors and hedge funds involved, it could have the capacity to manage such sales, and if bitcoins are auctioned effectively, the long-term price impact could be relatively limited” , he declared.
While these developments bring the U.S. government’s potential sale of more than 69,000 seized bitcoins closer, uncertainty remains over whether and when the government will take action.
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“It is unclear whether the US government will liquidate the entire amount or keep the assets. They could learn from Germany’s previous hasty bitcoin sale, which led to sales below the market, around $57,900 on average,” said Valentin Fournier, analyst at BRN. said.
“To avoid a similar outcome, the government could choose to gradually sell off or even retain the stakes.”
He noted that the market may have already priced in this possibility, which could allow Bitcoin to rebound from its current decline.
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