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(Kitco News) - The U.S. government is pulling out all the stops to distance itself from cryptocurrencies and take the market down a peg, as a recent court filing shows that the Department of Justice (DoJ) has begun selling the Bitcoin (BTC) stash acquired from the takedown of Silk Road back in 2013.
According to the Friday filing with the U.S. District Court for the Southern District of New York regarding the sentencing of James Zhong, the government has already started the process of liquidating the 51,352 BTC seized as part of investigations into Silk Road and Ross Ulbricht.
Ulbricht is the infamous creator of Silk Road who is currently in prison serving a double life sentence plus 40 years, without the possibility of parole. James Zhong pleaded guilty in November to stealing the BTC stash in question from Silk Road and forfeited the tokens to the DoJ as part of his plea deal.
The Silk Road marketplace functioned as a digital black market that allowed users to buy and sell illicit goods including weapons and stolen credit card information. The marketplace drew the ire of U.S. authorities, and they arrested Ulbricht in 2013 and shut the marketplace down.
The court filing shows that on March 14, government officials sold 9,861 BTC for more than $215 million, leaving roughly 41,491 BTC in the government’s possession.
"The Government understands [the seized Bitcoin] is expected to be liquidated in four more batches over the course of this calendar year," said the court filing. “The Government understands from IRS Criminal Investigation - Asset Recovery & Investigative Services that the second round of liquidation will not be sold prior to Zhong’s sentencing date.”
While many in the crypto ecosystem see this as another prong in the government's ongoing Operation Chokepoint 2.0, which seeks to rein in the U.S. crypto industry, the BTC sales have had the opposite effect, as data from TradingView shows that the price of Bitcoin surged on March 14, the day the first tranche was sold, and has climbed higher since.
BTC/USD 4-hour chart. Source: TradingView
It appears the slowly spreading bank crisis has thwarted the possibility that the sales would negatively impact the Bitcoin price as global investors seek wealth preservation outside of the traditional financial system.
According to data from CryptoCompare's most recent Digital Asset Management Review, the amount invested in digital asset products rose for a fourth straight month in March, with assets under management climbing to $13.4 billion, an increase of 10.9% since February. This also represents a 60% increase since November, when the FTX bankruptcy sent AUM values crashing.
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Bitcoin-based investment products have been the biggest beneficiaries, rising 14% to $22.7 billion, while Ether-related offerings increased 6.25% to $7.22 billion.
Bitcoin’s share of overall digital investments hit a nine-month high of 72% in mid-March, right around the time that the government began selling its BTC stash. Crypto-related products labeled “other” saw assets decrease 13.3% to $1 billion, taking their market share down to 3.2%.
“The increase in bitcoin market share was consistent with the surge in bitcoin dominance and the shift away from altcoins that investors have been making in response to the recent market turbulence,” the report said.
