How Much Bitcoin Does the US Government Own?
The US government owns more than $5 billion worth of bitcoin. That is a 207,189 stash of bitcoin. This may surprise many, given the backdrop of the US government’s aggressive crackdown on cryptocurrency and digital currencies in general. Although the high volume of bitcoin owned by the government did not get into their possession from a direct purchase like other whales, but rather from seizures, nevertheless, possession of such an amount of bitcoin has made the US government one of the largest “whales”. A term used to describe individuals or groups that own large amounts of a cryptocurrency.
How The US Government Accumulates Bitcoin
Public filings show that the government has seized over 200,000 tokens since 2020 mostly from cybercriminals, according to crypto firm 21.co. A large amount of the bitcoin stash in the government coffers is made up of tokens seized from the online black market Silk Road, James Zhong the founder, and culprits who hacked the Bitfinex exchange in 2016, according to data from 21.co.
How the US Government Disposes Digital Assets
Usually, the government auction off its crypto assets after the conclusion of relevant legal proceedings, and reimburse victims with the money. As they did in March after selling 9,861 seized bitcoins via Coinbase, and compensated Bitfinex in July with the sum of $300,000, according to the Wall Street Journal. Between 2014-2023, according to data from software engineer and researcher Jameson Lopp, the U.S. sold $366.5 million worth of Bitcoin in 11 auctions.
What will be the Impact on the market if the US government decides to sell off their current stash?
This will most likely cause a huge downward swing, as Bitcoin is not only the largest cryptocurrency by total market capitalization, but the crypto market has also been in a bear market over the past year. The poor economy, coupled with the Federal Reserve’s aggressive rate hikes to fight inflation, and the collapse of FTX, the second largest crypto exchange after Binance, coming after the Luna crash, have all contributed to a devastating crypto winter.
Bitcoin has crashed as low as $16,000 in the current bear market. Although many feared a complete crypto capitulation, followed by massive liquidations, the market experienced a bear market bounce and has managed to trade between $26,000 and $31,000 since mid-March. Due to reduced investors’ enthusiasm for the sector along with low volatility, if the government decides to sell their stash, that will have a huge impact on not just Bitcoin, but the entire crypto market.
Other Factors That Influence Crypto in 2023
Though the FED has temporally paused the rate increase the overall macroeconomic climate has had a great impact on the crypto market. For instance, the current global economic downturn, with many countries in recession, including technically the US, who instead of admitting the recession, chose to change the definition of a recession. This has reduced investors’ participation in risky assets such as crypto.
Government regulations and agencies, especially the Securities and Exchange Commission, have been another factor that has impacted crypto negatively.
The growing interest adoption of cryptocurrencies by institutional investors is a positive factor for the market. Although a single error tweet made Bitcoin rise 7% in less than an hour, the gains disappeared almost as quickly. Cointelegraph tweeted in error that a bitcoin spot ETF was approved in the US, but it has not been approved and when the market realized, a lot of trading positions were liquidated. Over $100m was lost. Cointelegraph has since apologized.
