US Government Announces Final Silk Road’s Bitcoin Auction

The US government on Monday announced that it is auctioning the last remaining Bitcoins belonging to the now-defunct underground marketplace Silk Road.

According to the US Marshal Service’s (USMS) press release, the auction of 44,341 Bitcoins (nearly $1.5 million at press time) will take place on November 5 this year, from 8 am to 2 pm. The Bitcoins will be offered in 22 blocks: 21 blocks of 2,000 Bitcoins and 1 block of around 2,341 Bitcoins. The auction winners will be announced the very next day — on November 6.

The agency further stated:

“The registration period starts Oct. 19 and runs until noon Nov. 2, at which time potential bidders must have completed all registration requirements. Registration documents that were submitted for the Marshals’ previous bitcoin auctions are not valid for this auction; interested bidders must submit new registration documents to be considered for this auction.”

The USMS had seized around 144,000 BTC from Silk Road’s convicted operator Ross Ulbricht during a raid in 2013. Since then, the agency has liquidated the money in two different auctions. The first auction, held in June 2014, was able to sell off 30,000 Bitcoins to renowned venture capitalist Tim Draper; while the second auction, for 50,000 Bitcoins, was also partially won by Draper, alongside Barry Silbert.

The bidder turnout in the second auction was recorded to be a way lower than the first (around 75 percent). Many blamed the declining value of Bitcoin as one of the major contributing factors for such a lower turnout. It was hugely volatile, and was fluctuating between $360 and $370 at that time.

The USMS, however, was able to auction the entire Bitcoin blocks.

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Just a few hours before, Bitcoin price topped up to a new intraday peak (at $266) and is now hinting to flatten out, as what normally happens. The price is now attempting to build up a new base near this new tropospheric level, while facing a firm selling pressure towards the next downside support near 260.

bitcoin price 4h

The traders meanwhile are already drawing fundamentals near this wild rally. Many believe the launch of Barry Silbert’s Bitcoin Investment Fund had influenced the demand of Bitcoins; therefore the rally. Some are also associating the upcoming Silk Road Bitcoin auction to be the cause of this recent new spike. In the end, all seem to be mere speculations.

This is definitely not a time to get excited, as the current rally seems like a repetition of what we have been encountering in last few weeks. The volatile green candles appears out of flatten markets, establish new higher highs, and market eventually reverses positions towards south. To make sure the current bull run extends, price at least needs to cross above the 315-mark. Until that time, a dump awaits as per the recent price actions.

Therefore, we are still looking for a dump towards the near-term support level around 260. The technical indicators, without a doubt, are however horning like bulls now. The price is way above the 50H SMA, while the RSI is just shy of testing the overbought threshold near 70. The MACD blue curve meanwhile has its head towards north. A confirmed retest towards the current peak near 266 will establish 275 as the next upside risk. Meanwhile, the primary downside risk will continue to stay near 245, thanks to the selling pressures near the peak points.

Just a couple of days back, the United Stated Marshals Service (USMS) announced selling away another large stash of Ross Ulbricht’s Bitcoins (50,000 BTC). The statement came amid a 4% value surge on Coin Market Cap, subjecting Bitcoin once again to traders’ guesstimates, so can this auction affect bitcoin price?

An auction might be the most fundamentally accurate event for Bitcoin trading market — especially in the ways it drives the value. As we see the last two auctions held by USMS, you will notice similar price movements that took place before and after the events. For instance, let’s look at this chart below. [Credits: Trading View]

Bitcoin price

We have created two rectangular blocks, each representing the period of auction hypes. Despite their varying lengths, you can notice a pattern here. There are always speculative buyings before or around the auction (the large green candles), followed by an almost corresponding sell-off (the near-term bearish flags). There is indeed a conflict between demand before, and after the auction.

Also notable is the measurement of auction hypes which seems to depreciating alongside Bitcoin price. During the first event, there were three sections of people who had their personal opinions about future price movements. The first one believed that Bitcoin price will simply crash due to excessive supply; the middle one believed that it will not react to the auction; while the third one simply predicted a volatile spike.

At least there were speculations, which contributed a lot in hyping up Bitcoin value. In the end, the hype died and the price came back to being normal.

The second auction however missed this hype, thanks to Bitcoin price that had dropped 50% since the first auction. The technical indicators were also pointing towards a further drop that kept bidders away from this event.

What to Expect from the Third Bitcoin Auction?

The fundamental dynamics since the second Bitcoin auction have changed a lot. Bitcoin has recently recovered after testing its all-time-low (since October 2013) around 165, and is on a smooth uptrend ever since. However, if we zoom into the charts we can still see the absence of enough trading volume. Price thus is consolidating between presumed support and resistance levels.

bitcoin price

The lower Bitcoin value however can also act as a great opportunity to enter the market for cheap. As you can see the 1H chart above, the price is currently attempting a smooth bullish correction — a part of which could be an influence of auction news. As the next auction is scheduled on March 6th, Bitcoin price is hopeful to consolidate until a couple of days before the event. However, we could see a small-medium spike towards 275 around the aforesaid date. A similar dump will follow as well.


[Disclaimer: Bitcoin trading is risky and could be manipulated under the influence of bad actors. NewsBTC won’t be responsible for any incurred losses faced by readers.]


Charts from Bitfinex