Bitcoiners are eying up crypto held by the feds.
On Wednesday, the price of Bitcoin took a sharp nosedive—plunging 7% in an hour. It took most of the crypto market with it, too.
The dip came shortly before blockchain analytics firm Arkham had said wallets linked to defunct crypto exchange Mt. Gox and the U.S. government had moved large amounts of Bitcoin.
It turned out to be a false alarm as a result of a “bug fix” Arkham later said in a statement. But it led some to believe that the dip in prices came because the government started dumping large amounts of Bitcoin into the market.
Today we fixed a bug related to Bitcoin alerts that caused us to no longer under-send alerts to a small subset of user’s private labels. This was one of them. This fix won’t affect any additional users, and was unrelated to labels generated by Arkham — we understand the impact… https://t.co/VqbX04J2bM
— Arkham (@ArkhamIntel) April 26, 2023
But the fact remains that the government-owned Bitcoin and Mt. Gox coins are intriguing to investors: On Thursday, another blockchain analytics firm, Glassnode, said that the American government and the Mt. Gox trustee hold 205,514 and 137,890 Bitcoins respectively (over $10 billion in crypto)—and advised investors to keep an eye on the funds.
This is because when such large amounts of Bitcoin get transferred, it’s market moving, according to experts.
But first, why does the U.S. government hold Bitcoin? And what’s Mt. Gox?
The Department of Justice last year seized more than $3 billion worth of Bitcoin affiliated with the dark net marketplace Silk Road. They then sold a huge chunk of it—and said they plan to sell more.
Mt. Gox, on the other hand, was a popular Bitcoin exchange that was forced to shut down eight years ago after a crippling hack. Once one of the biggest exchanges in the world, it closed in 2014 after losing 850,000 Bitcoins (today worth $24.9 billion) in the massive exploit.
Investors who lost their funds are still waiting to get it back from a trustee.
Christoph Ono, a contributor at open source Bitcoin resource Bitcoin Design, told Decrypt that the intrigue is all centered around risk.
He said: “Will the US government hold on to those Bitcoin forever? Or sell them off? If so, will they do it in a manner that reduces impact on the market or just dump in one go? Or auction them off? Who knows.”
The fascination with watching the wallets where Mt. Gox funds are being held is similar, he added. “I believe Mt. Gox is somewhat similar in that there are various unknowns,” Ono said. “At some point the coins will be released into the wild but no one really knows when and how.”
While Glassnode lead analyst James Check said that big investors may be interested in government coins.
“Periodically, the U.S. government auctions off these coins, which institutions in particular often find quite attractive, since they are in theory blessed and cleared by the U.S. government,” he said. In the past, some institutions have fretted over the provenance of crypto assets when buying them and worried they could be unknowingly buying from bad actors.
Whatever happens, investors are always keeping an eye on big HODLers—known as whales—especially unorthodox ones like the U.S. government.
“Roughly 10 billion dollars of bitcoin is an immense amount for the market to absorb,” Evan Kaloudis, the developer behind Zeus, a non-custodial Lightning wallet, told Decrypt. “I for one, though, am excited for the government to offload them to the market to circulate to new holders.”
Stay on top of crypto news, get daily updates in your inbox.
Source: https://decrypt.co/138356/why-everyone-is-keeping-a-close-eye-on-mt-gox-us-gov-bitcoin-wallets
