US Marshals Missed $21 Billion Opportunity Selling Bitcoin

The US government has recently lost a significant amount of money by selling seized Bitcoin. Between 2014 and 2023, the US Marshals Service auctioned approximately 195,000 BTC for just $366 million. Given the current price of Bitcoin at $105,000, the same amount of Bitcoin would now be worth over $20.4 billion. This discrepancy highlights a missed opportunity, with Senator Cynthia Lummis estimating the true opportunity cost to be over $21 billion when measured against cycle highs.

The first sale of seized Bitcoin occurred in 2014, when 29,657 BTC from Silk Road wallets were liquidated for about $18.7 million. At today's prices, these coins would be worth $3.1 billion. Subsequent sales have yielded progressively smaller returns relative to Bitcoin’s growing market capitalization. By 2023, a transfer of 9,861 coins had minimal impact on prices. The Department of Justice received clearance to sell 69,370 seized BTC in January, but this sale has been postponed following executive intervention.

In October 2013, public tracking allowed anyone to monitor the FBI’s wallet as it swelled with confiscated Bitcoin. This led to panic among hardcore Bitcoin users, who proposed a protocol change to freeze or blacklist the address. Core maintainers refused, arguing that selective censorship would undermine the network’s credibility and break Bitcoin’s neutrality. This decision set a precedent that technical guardianship would remain apolitical, and governments would have to engage through policy, courts, and markets, not code.

In a recent pivot, the White House has established a Strategic Bitcoin Reserve, instructing the Treasury and the Department of Justice to consolidate approximately 198,000 BTC still in federal custody. This reserve is intended to enhance national resilience and provide fiscal optionality. Officials frame the reserve as a hedge akin to gold, while allies on Capitol Hill portray it as a first-mover advantage in a looming sovereign-crypto arms race. Other nations, including the United Kingdom and China, also hold significant amounts of seized Bitcoin.

The market impact of recent sales has been minimal, as the reserve represents less than one percent of the circulating supply. Daily trading volume can easily absorb larger flows. However, policy tone remains a significant factor in price movements. For instance, rumors that Congress could force liquidation of the reserve led to a three percent drop in Bitcoin’s price in after-hours trading last week.

Looking ahead, several key issues are on the horizon. A House bill seeks to limit cold-wallet custody costs and mandate quarterly public audits. The Office of the Comptroller of the Currency must decide whether to outsource key management to private firms or run an in-house facility. Analysts expect at least three G-20 nations to announce similar reserves within the next eighteen months.

For veteran Bitcoin users, the irony is palpable. The chain remained neutral, the proposed fork never materialized, and the state that once sold Bitcoin at fire-sale prices now proudly displays a “HODL” badge. However, questions remain about the government’s role in hoarding seized Bitcoin and the potential conflict of interest. As the world moves towards hyperbitcoinization, there will inevitably be a showdown between fiat and Bitcoin. The current administration’s rhetoric supports Bitcoin, but concrete actions lag behind progress on alt-coins. The mantra “don’t trust, verify” remains relevant, and there is little verification that Bitcoin benefits from government-held coins beyond price pumping.