Impact of US Government Selling $6.5 Billion in Bitcoin Confiscated from Silk Road
CryptoQuant believes that the US government selling $6.5 billion in Bitcoin confiscated from Silk Road would not have a significant adverse impact on the market if sold via over-the-counter (OTC) desks, according to a recent report.
Silk Road Bitcoin Sale
The US Department of Justice (DOJ) was cleared to sell the BTC on Jan. 8. Despite market speculation, the Silk Road Bitcoin stash remains dormant, with no movement recorded.
Bitcoin’s 15% fall from its all-time high of $108,000 to $92,099.54 as of press time is one of the worst drawdowns in the past three months and was primarily driven by short-term holders selling amid panic.
- Approximately 36,400 BTC were transferred from short-term holders to exchanges in the past 24 hours.
- The Spent Output Profit Ratio (SOPR) fell below 1, indicating that these coins were moved at a loss.
CryptoQuant’s analysis pointed out that the potential selling pressure from the Silk Road stash is negligible in the long term. The firm noted that over the past year, Bitcoin’s realized market cap has increased significantly, dwarfing the $6.5 billion the Silk Road stash represents.
Method of Sale
Although selling the Silk Road stash through OTC desks would maintain market integrity in the short term, the firm acknowledged that dumping the $6.5 billion worth of BTC on the spot market could cause severe price corrections.
- The German government’s sale of 50,000 BTC in July 2024 had a noticeable impact on Bitcoin’s price.
- Short-term negative volatility depends on how the DOJ sells the BTC.
CryptoQuant’s analysis cited the importance of on-chain metrics and noted that BTC’s apparent demand remains very high. Apparent demand is the difference between Bitcoin production through mining and changes in inventory, indicating a strong market.
- Bitcoin will remain on an upward trajectory as long as capital flows into the market.
- BTC’s realized cap is currently at its highest levels.
