New data reveals that the US federal government has acquired a significant stash of Bitcoin over the years, making it one of the largest holders of the cryptocurrency in the world. With approximately 200,000 Bitcoin currently valued at over $5 billion, the government’s influence in the market has caught the attention of bitcoiners, who consider it a major whale.
The government’s bitcoin holdings have largely come from seizures and confiscations related to criminal activities. For instance, Jimmy Zhong was recently sentenced to prison for stealing 50,000 bitcoin from the Silk Road in 2012. The government confiscated his bitcoin, but due to legal proceedings, a substantial portion remained frozen. Over the years, the value of these seized bitcoin has skyrocketed.
While the government’s bitcoin holdings may have originated from criminal activities, it has unintentionally benefitted from holding onto these assets. The lengthy trials surrounding these cases have allowed the government to keep the bitcoin in its wallets or directly hold them, resulting in significant growth as the bitcoin market has soared. Despite claims by the IRS’s executive director that the government does not play the market, the government has implemented more sophisticated methods to profit from its bitcoin holdings. Instead of auctioning off the confiscated coins, it now sells them directly on exchanges, generating hundreds of millions of dollars in revenue.
Government’s Potential Influence on the Bitcoin Market
The bitcoin community has begun questioning what would happen if the US government took a more active role in the market. While federal agencies are unlikely to adopt a decentralized currency that challenges state control, their massive bitcoin holdings give them significant leverage. In the past, whales have had a substantial impact on bitcoin price fluctuations, and with the US government’s holdings, this influence could become even more pronounced.
Consider the current state of the markets and ask yourself: What if the federal government actively acted as a bitcoin whale, maximizing its gains and directly influencing its asset’s price? The government has already taken steps towards becoming a formidable bitcoin-selling machine by refining its liquidation process. With the market being highly active and volatile, there are numerous opportunities for federal agencies to take deliberate actions.
Another factor that could increase the government’s influence is the imminent approval of a Bitcoin ETF. The community is convinced that regulatory approval is on the horizon, and the anticipation has caused a spike in bitcoin’s value. If these approvals become more frequent, the government could exploit the continued rise of bitcoin to its advantage.
Moreover, the government could strategically time the sale of its bitcoin assets during the mining industry’s anticipated halving event. By unraveling big sales that cause a crisis of confidence in the market, federal agencies could incur losses relative to future prices while still making substantial gains from their long-held assets.
Power and Potential Manipulation
In this hypothetical scenario, the main concern lies in the power and influence that such large sums of money hold. The federal government wields immense power, both in terms of its ability to wage war and impact global trade. However, the economic stakes of Bitcoin are equally significant and have the potential to sway decision-makers within these bureaucracies.
The existence of the government’s bitcoin holdings introduces an organizing principle that, when combined with its bureaucratic power, could potentially be exploited. It would only require a few key individuals within federal agencies to carry out deliberate plans to impact the market. While their motivation may not be to replace the dollar or establish a trustless global economy, they would understand the financial benefits associated with the rise of Bitcoin.
In conclusion, the US federal government’s massive bitcoin holdings have the potential to significantly impact the market. While their current holdings may seem relatively small in comparison to the country’s GDP, the combined power of being a whale and having the ability to materially influence the market is not to be underestimated. The government’s bitcoin sales, deliberate or otherwise, could cause substantial ripples in the market, affecting businesses and investors worldwide.
Sources: Bitcoin News
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