The US government has over $4.4 billion in Bitcoin it can dump at any time

Over the past few years, the United States government has become one of the biggest Bitcoin whales just by seizing ill-gotten funds. Eventually, it will probably seek to liquidate these funds through private auctions.

Over 50,000 BTC seized

The US government owns a huge amount of Bitcoin.

Today, the Department of Justice (DOJ) has announced that it seized just over 50,676.17 BTC (worth about $1 billion in today’s prices) in November 2021 from a Bitcoin trader named James Zhong. Zhong obtained the sum by defrauding the darknet marketplace Silk Road by exploiting the platform’s withdrawal mechanism in September 2012; he pleaded guilty to one count of fraud last week, on November 4, 2022.

The DOJ published the confiscation as a $3.36 billion move, which, while correct at the time of the enforcement action, does not take into account that Bitcoin is now down 69% from all-time high. Nonetheless, the seizure is notable – it is the third largest in cryptocurrency history Crypto Briefingits count – especially considering the amount of Bitcoin the US government already controls.

Over $4.43 billion in Bitcoin

In addition to the 50,676 BTC seized from Zhong, the US government has already purchased at least 163,370 BTC over the past two years, for a total of 214,046 BTC, or approximately $4.43 billion, minimum.

In November 2020, DOJ caught 69,370 BTC (worth over $1.4 billion today) from another Silk Road user, published as “Individual X” by the department. At the time, this was the network’s fourth largest Bitcoin address; the seizure officially made the US government one of the largest Bitcoin whales in the world.

The agency too seized over 94,000 BTC from Heather “Razzlekhan” Morgan and Ilya Lichtenstein, claiming the pair conspired to launder the proceeds of crypto exchange Bitfinex’s infamous hack in 2016. The sum, worth $3.6 billion at the time, is now worth over 1, 9 billion dollars.

Owning 214,046 BTC makes the US government a huge Bitcoin whale. In accordance BitInfoChartsjust one BTC wallet—labeled as Binance’s cold storage wallet—holds a larger sum, 252,597 BTC, and those funds certainly belong to Binance customers, not the exchange itself.

However, looking for the largest BTC wallets does not give the whole picture, as whales are likely to split their holdings between different wallets. For example, Satoshi Nakamoto, the anonymous creator of Bitcoin, owns more than 1.1 million BTC, but the amount is divided between 22,000 different wallets.

Is the US government the biggest Bitcoin whale besides Satoshi? It’s hard to say, but it certainly contains more than Bitcoin’s biggest public advocate, Michael Saylor. Through his software company, Microstrategy, Saylor was able to do just that accumulate over 130,000 BTC in the last two years.

Concern for Bitcoin Holders?

Typically, the US government liquidates its Bitcoin holdings through the US Marshalls Service through public auctions. For example, venture capitalist Tim Draper famously bought 30,000 BTC from the government in 2014 for around $18.5 million – or roughly $616 per coin. Most likely, the BTC seized by the DOJ will similarly be offered to the public.

In recent years, the DOJ has attempted to time its auctions according to market fluctuations in order to sell its holdings for the highest possible price. In November 2021, it auctioned off $56 million worth of cryptocurrencies seized from a BitConnect promoter, liquidating its holdings at the height of the bull market. Whether the agency will have the patience to wait for Bitcoin to rise again before selling its holdings remains to be seen. So far, it has refrained from liquidating the proceeds of the Individual X and Razzlekhan confiscations.

Disclosure: At the time of writing, the author of this piece owned BTC, ETH and several other digital assets.