The US has a long history of selling off Bitcoin — with incredibly bad timing. It could have ended up losing billions of dollars as a result.

It’s strange to think that — at least until very recently — the US government had more Bitcoin what Microstrategy.

According to Arkham Intelligence, a series of confiscations following criminal crackdowns means that Uncle Sam now has a staggering stash of 213,543 BTC… that’s over 1% of the total supply.

MicroStrategy, which began aggressively adding the world’s largest cryptocurrency to its balance sheet in August 2020, only surpassed that milestone in March.

When we consider these numbers in isolation, it would be easy to assume that the United States’ vast BTC holdings are extremely bullish — a vote of confidence in the cryptocurrency sector.

But make no mistake, the US is not El Salvador.

Bitcoin Holdings in the US | Source: Arkham Intelligence

US politicians, regulators and law enforcement agencies have repeatedly expressed fears that Bitcoin has the potential to undermine the US dollar — with some warning that the cryptocurrency could be used for money laundering and criminal activity.

This worldview is no doubt informed by the fact that this massive stash came primarily from two major seizures. In late 2022, the Department of Justice seized 50,676 BTC that was hidden in the home of a man who illegally stole it from Silk Road darknet market.

In a particularly surreal development, some of the coins confiscated by James Zhong were “in a single-board computer that was submerged under blankets in a popcorn tin stored in a bathroom cabinet.”

OK… this is a pretty unusual hiding place.

Another record looting occurred a little earlier that year when 94,000 BTC was stolen from Bitfinex was seized by a couple who were later charged with money laundering.

All of this opens the door to another question: what should the US do with all these cryptocurrencies?

HODL or auction?

Some American politicians have argued vehemently that the government should hold this cryptocurrency for as long as possible so that it can appreciate in value.

But the US actually started selling BTC back in 2014 — and the data shows that, well, they’re not very good at it. Just look at this research of past liquidations from Jameson Lopp:

Previous BTC Liquidations in the US | Source: Jameson Lopp

According to its estimates, the government has made $366 million in sales so far — but dramatic price increases in recent years mean it may have lost $11.7 BILLION.

In 2014, a chunk of 50,000 BTC that belonged to Ross Ulbricht was sold for $19 million. At the time of writing, that same cryptocurrency would be valued at over $3.1 billion. Ouch.

Typically, transactions orchestrated by the US Marshals Service see the proceeds split several ways — among federal agencies, law enforcement agencies that help bring perpetrators to justice, and those who have been victims of the crime. Anything left over goes back to the Treasury.

While U.S. officials didn’t have a crystal ball at the time, it’s painfully clear now that victims might have been better served if the liquidations had occurred a few years later.

Undeterred, the government sold another 9,861 Silk Road-related BTC in March 2023 for $215.5 million after taxes — an average price of about $21,853 per coin. It was planning to sell about 40,000 BTC in four additional batches the following year. But while large amounts of Bitcoin were moved, it doesn’t appear that these transactions were finalized. As GlobalData Thematic Intelligence recently noted:

“If Bitcoin were to continue to perform as it has in the past, by 2030 the US stockpile of 210,000 BTC would begin to rival central bank gold reserves, currently valued at over $600 billion.”

Source: GlobalData Thematic Intelligence

What about other countries?

China, the United Kingdom It is Germany they also hold around $20 billion worth of BTC between them — and in recent days, there has been growing nervousness that Berlin could be close to carrying out some liquidations.

It is because a large portion of Bitcoin that was seized by the European power was transferred to centralized exchanges.

At times, this has weighed heavily on BTC’s spot price amid fears that it would exacerbate selling pressure — and coincide with the impending launch of Mount Gox payments to creditors.

In an unusual turn of events, Bitcoin’s short-term price performance could be put in jeopardy by the very governments it is supposed to challenge.

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