U.S. authorities moved $1 billion in bitcoin (BTC) acquired from a dark web breach to new wallet addresses on Wednesday, including one controlled by Coinbase, fueling investor concerns that strong sell pressures might cause the token’s price to drop.
According to data from blockchain security company PeckShield, authorities transferred the bitcoin across three transactions. Over 10,000 bitcoin were routed to Coinbase-controlled accounts, while almost $41,000 worth of tokens were sent to wallets under the authority of the government.
Investors took note as soon as PeckShield posted its results on Twitter early on Wednesday morning.
Investors expressed concern in the hours following the report’s publication that authorities may sell the seized bitcoin on the open market, perhaps sinking the price of bitcoin, which has since rebounded from its two-year low of around $15,500 in November. The worries led to a 2% price decline in bitcoin, which brought it under $22,000.
An open market transaction would differ from how the government has always handled confiscated digital assets. Usually, seized property is sold by the government at auction. The government sold the bitcoin that it had taken from the proprietor of the online criminal market Silk Road in 2014 and 2015.
Conor Ryder, a researcher at the crypto markets research firm Kaiko, claims that although worries about the tokens’ sale on the open market may be exaggerated, worries that bitcoin prices may drop are not wholly unfounded. One has to question if bitcoin will see some short-term headwinds given that the transfer of Silk Road bitcoin to Coinbase is almost certainly being done with the goal to sell [the recovered tokens].
According to Mark Connors, head of research at 3iq, a digital asset management, the market’s ability to handle those stresses would largely depend on its makeup. To put it another way, the type of token holders and the number of tokens they possess will have a significant impact on how the market will respond to a possible market-moving event.
According to Connors, the market’s present makeup may help bitcoin withstand selling forces better than it did during the TerraLuna fall last spring. This is due to the market having less leverage than it had the previous year. It’s also because there are more investors holding wallets with more than $1,000 worth of tokens now than there were last year, when there were a lot more crypto-curious investors with much lower bitcoin holdings.
With the higher amount of push [in] the market now compared with the weaker hands and more leverage [that] defined the market a year ago], there should be a quicker bounce back if there is sell pressure.
Yet, the price of bitcoin may still change as soon as the government announces its intentions for the freshly transferred bitcoin. There are still many unknowns regarding the government’s plans for the tokens. If the bitcoin will be put up for auction by the government is yet unknown. Furthermore, it is unknown if the government will ever combine the holdings.
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