Weak hands: US government lets $1.7b Bitcoin windfall slip through its fingers

Over the span of four years, the United States Marshals Service missed out on a literal fortune by auctioning off seized bitcoins too early.

Between June 2014 and January 2020, the Marshals Service auctioned off approximately 185,230 bitcoins seized during the Silk Road and other criminal investigations. That total amounts to just over 1% of the total number of BTC in circulation.

Using current and historical market data, crypto enthusiast and Twitter influencer Jameson Lopp created a nifty little tool that details when each auction took place, how many bitcoins were sold, and how much money the U.S. government received.

The results, according to Lopp’s data, are as follows:

• Total BTC seized and sold: 185,230 BTC
• Total USD gained from auction: $151,440,000.00
• Current USD value of all sold BTC: $1,894,293,911.14
• Potential USD gains missed: $1,742,853,911.14

The record gathered by Lopp shows that more than half of the coins were sold before 2016. Due to the extreme volatility of Bitcoin during that four-year period, it is estimated that the seized bitcoins sold for an average of just US$818 [AU$1,217] per coin.

Based on current Bitcoin prices, the government’s weak hands caused it to miss out on potential gains of more than $1.74 billion.

U.S. has ‘weak hands’ for Bitcoin compared to other countries

As regulatory authorities around the world have become more active in cracking down on criminal enterprises involving crypto, other governments are following the United States’ lead in auctioning off seized bitcoins and other cryptocurrencies – albeit with much better results.

In September of last year, UK authorities auctioned off $369,000 worth of Bitcoin and other cryptocurrencies seized from 20-year old Elliot Gunton who was found guilty of selling hacking services and stolen personal data online.

During that auction, whole bitcoins sold for $8,365 each – more than ten times the average price of BTC auctioned by the U.S.

The government of Bulgaria has made out even better than the U.S. and UK combined in terms of price per Bitcoin.

In May of 2019, rumors began to surface that the government was sitting on a cache of 200,000 BTC that it had seized from criminals.

In actuality, however, those bitcoins had been quietly auctioned off the previous year to international buyers including sovereign wealth funds and investors from several Asian countries.

Local media reported at the time that the bitcoins were selling for over $16,000 per coin – nearly twenty times the U.S. average auction price.