US government begins selling Silk Road BTC amid global banking crisis

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(Kitco News) – The US government is pulling out all the stops to distance itself from cryptocurrencies and take down the market, as a recent court case shows that the Department of Justice (DoJ) has begun selling Bitcoin (BTC) stash acquired from the takedown of Silk Road back in 2013 .

According to the Friday filing of the US District Court for the Southern District of New York regarding the sentencing of James Zhong, the government has already begun the process of liquidating the 51,352 BTC seized as part of the Silk Road and Ross Ulbricht investigation.

Ulbricht is the notorious creator of Silk Road who is currently in prison serving a double sentence of life 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 forfeiting 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 illegal goods including weapons and stolen credit card information. The marketplace drew the ire of US authorities, who arrested Ulbricht in 2013 and closed the marketplace.

The court filing shows that on March 14, government officials sold 9,861 BTC for more than $215 million, leaving approximately 41,491 BTC in the government’s possession.

“The government understands [the seized Bitcoin] is expected to be liquidated in four additional groups during this calendar year,” the lawsuit said. “The government understands from IRS Criminal Investigation – Asset Recovery & Investigative Services that the second round of liquidations will not be sold until 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 US crypto industry, the BTC selloff has had the opposite effect, as data from TradingView shows that the price of Bitcoin increased on March 14, the day the first tranche was sold, and has climbed higher since.

BTC/USD 4-hour chart. Source: TradingView

The slowly spreading banking crisis appears to have thwarted the possibility that the sell-off will have a negative impact on the Bitcoin price as global investors seek wealth preservation outside the traditional financial system.

According to data from CryptoCompare’s latest Digital Asset Management Review, the amount invested in digital asset products increased for a fourth consecutive month in March, with assets under management climbing to $13.4 billion, a 10.9% increase since February. This also represents a 60% increase since November, when the FTX bankruptcy sent AUM values ​​plummeting.

Bitcoin-based investment products have been the biggest gainers, rising 14% to $22.7 billion, while Ether-related offerings rose 6.25% to $7.22 billion.

Bitcoin’s share of total digital investment hit a nine-month high of 72% in mid-March, right around the time the government began selling its BTC holdings. Crypto-related products labeled “other” saw assets decrease by 13.3% to $1 billion, taking their market share down to 3.2%.

“The increase in bitcoin market share was consistent with the increase in bitcoin dominance and the shift away from altcoins that investors have created in response to the recent market turbulence,” the report said.