According to recent study, the US government has accumulated a sizeable holding of Bitcoin over the last few years, having seized almost $5.5 billion of the cryptocurrency since 2020. The US now ranks among the largest cryptocurrency “whales” in the world because to its substantial ownership position. The term “whale” was used by the digital asset community to refer to organisations or individuals that possess a sizable amount of bitcoin.
- Public filings reveal that Washington has obtained over 200,000 tokens from cybercriminal activities since 2020.
- The accumulated holdings are approximated at a total of $5.5 billion, as stated by crypto firm 21.co.
Source of Government’s Bitcoin Holdings
Various sources contribute to the US government’s massive bitcoin holdings. A notable portion of these bitcoins were confiscated from illicit activities related to the online black market Silk Road, its founder James Zhong, and criminals responsible for hacking the Bitfinex exchange in 2016.
Historically, the US government has offloaded its bitcoin holdings through auctions, post the completion of the necessary legal procedures. The funds generated from these sales are typically utilized to compensate the victims of these cybercriminal activities. Washington auctioned 9,861 bitcoins via Coinbase in March and allocated $300,000 for compensating Bitfinex in July.
Impact on Bitcoin’s Price
The trading decisions made by significant stakeholders, such as the US government, can potentially swing the price of Bitcoin considerably. Over the past year, the digital-asset trading volumes have stagnated, implying that significant sales or purchases by large stakeholders can create sizable market ripples.
The year 2022 was particularly tumultuous for crypto prices. Influenced by the Federal Reserve’s assertive interest-rate hikes and the downfall of flagship companies like FTX, investors’ enthusiasm for cryptocurrencies waned. Bitcoin’s price plummeted below the $20,000 mark and has since been trading in a constricted range of $26,000 to $31,000 since mid-March.
The crypto industry is abuzz with anticipation concerning the potential approval of a Bitcoin exchange-traded fund (ETF) by the US Securities and Exchange Commission (SEC). Coinbase, a prominent crypto exchange, remains hopeful about the SEC greenlighting a Bitcoin ETF in the near future. Paul Grewal, the chief legal officer at Coinbase, shared this optimistic sentiment in a conversation with CNBC.
Recent developments bolster this anticipation:
- The SEC faced a substantial court setback when a judge denied their grounds to refute Grayscale’s proposal to transition its significant GBTC bitcoin fund into an ETF.
- The SEC’s decision not to contest this ruling within the stipulated timeline suggests an impending Bitcoin-related ETF approval.
Grewal opined that firms with strong proposals for crypto-based products are renowned blue-chip entities in the financial sector. This signifies the likelihood of progress in this arena.
The Potential of Bitcoin ETFs
A Bitcoin ETF can provide investors an avenue to possess bitcoin without direct purchase from an exchange. This alternative could appeal to retail investors, allowing them exposure to bitcoin without the requirement of managing the underlying asset.
Coinbase is poised to benefit significantly from any approved Bitcoin ETF. As the premier crypto exchange in the US, Coinbase is a staple in portfolios crafted to provide investors crypto exposure.
However, it’s essential to recognize challenges. Grayscale’s initiative to transition GBTC into an ETF has faced legal scrutiny, with allegations of defrauding investors exceeding $1 billion.
Bitcoin’s Future Valuation
Market speculation suggests that Bitcoin’s price could experience a surge if prominent financial institutions launch their Bitcoin ETFs. Predictions from CryptoQuant, a blockchain analytics firm, postulate that Bitcoin might soar beyond $50,000, even nearing its previous peak of $68,790 or potentially reaching as high as $73,000.
Underlying these forecasts are key assumptions:
- Financial institutions proposing new Bitcoin ETFs will advise their clients to dedicate at least 1% of their portfolios to Bitcoin.
- Considering the collective assets under management by these firms, a 1% allocation could inject an estimated $156 billion into Bitcoin.
However, it’s crucial to approach these estimations with a balanced perspective. Several Bitcoin-linked investment products already exist, offering alternatives to direct token purchases. The inclusion of major Wall Street firms in the Bitcoin ecosystem could further enhance its appeal, potentially driving prices upwards.
In summary, the US government’s substantial holdings, combined with the ongoing developments in the ETF space, suggest that Bitcoin’s trajectory will be a focal point for investors worldwide. The decisions made by significant stakeholders, especially the US government, will undeniably have profound implications for the crypto market.