- On the 15/08/2024, the US Govt Moves $590M worth of Bitcoins to the Coinbase Prime account.
- The transfer also triggered a debate on market effect because there was a large proportion of Bitcoin in the liquid market.
- Indeed, if the US government orders to sell these assets it will put extreme pressure on the Bitcoin prices.
- Bitcoin acquired in 2022 during the takedown of Silk Road; the DOJ grabbed approximately 50,000 BTC from the dark net market.
Introduction
The US government on 15/08/2024 sent almost 10000 BTC worth over 590M USD to Coinbase Prime account. Although much has been said about this big transfer putting a lot of pressure on the market, some analysts opine that this will not be the case. Considering all those nuances, specialists guess that such mechanism can be appointed for the custodial reasons rather then the trading ones.
Understanding the Bitcoin Transfer
There has been a lot of debate within the BTC community following the use of the digital currency made by the US government and deposited to Coinbase Prime. The Bitcoin, that the FBI confiscated during the Silk Road takedown, was transferred to the deposit wallet owned by Coinbase Prime. Such a transitional step raised eyebrows about a possible market effect because of so much Bitcoin flooding a liquid market.
Why Selling Pressure is Absent
Ryan Lee of Bitget Research looked into these issues while explaining that Bitcoin transfer means it is not sold. Coinbase Prime and the US Marshals Service tie-up is meant to ‘secure and trade’ large digital currencies, suggesting that the transfer could be more of a warehousing exercise.
To elaborate, Lee said that if the US government decided to sell these assets, it would likely put severe pressure on the Bitcoin prices because of the volumes in question. However, as is the situation with the current market liquidity among other factors, it is improbable that the company will be sold.
Possible Causes of the Transfer
- Custody Services: Coinbase Prime function to hold ETFs makes it secure to hold large quantity of crypto that is relevant to custodians.
- Strategic Trading: It could be for strategic trading purposes with an objective of serving the interest of government/Central Bank.
- Partnership-Driven Custody: What the recent example of a cooperation with the US Department of Justice and Coinbase Prime suggests is more of a custodial rather than an immediate liquidation.
Of what origin is the Bitcoin?
The Bitcoin at issue here was obtained in 2022 during the Silk Road takedown; in that operation, the Department of Justice seized around 50,000 BTC from the dark net market. Silk Road, today a non existent website, was involved in unlawful activities before it was brought down over a decade ago. The mastermind of the site, Ross Ulbricht, is still incarcerated, and he has two life sentences.
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