A total of five people bid on $1.6 million in bitcoin the government auctioned on Monday, according to Inverse, which begs the question: why did so few seek to bid on the last block of bitcoins the government was auctioning from the Silk Road bust of 144,000 bitcoins?
The U.S. Marshals Service (USMS) auctioned the block of 2,700 bitcoins on Monday. In six hours, someone placed the winning bid. Monday’s auction followed 44,000 bitcoins (estimated at $14.6 million) sold to four winners out of a pool of 11 bidders for Silk Road related assets.
USMS confirmed that an anonymous bidder bought the 2,700 bitcoins, according to Gizmodo. Winners of such auctions only have to make themselves public if they choose. For example, itBit, a New York-based exchange, confirmed it purchased one of the auction blocks in November when USMS sold other Silk Road assets.
So why were there so few bidders?
The recent USMS warning about Chinese hackers targeting bitcoin would not explain the lack of interest in the auction since that warning came long after the USMS began holding the auctions in mid-2014.
One possible reason is that Tim Draper outbid 44 bidders in the first auction, purchasing all 30,000 bitcoins. Draper’s bidding could have discouraged potential future bidders who didn’t think they could match the Draper family.
Another reason would be that there was a $100,000 deposit required for entering the auction. Applicants registering for the auction had to submit a Government-issued photo ID among other conditions, CCN.com reported.
The pool of cryptocurrency enthusiasts who can deposit this sum just for the possibility of buying bitcoins isn’t big. This, coupled with a suspicion about well-heeled investors, would dampen bidder interest.
Also read: Another Silk Road auction: USMS to auction 50,000 bitcoins taken from Ross Ulbricht
Still another explanation is that bitcoin may not strike potential bidders as a good investment. Earlier this year, the bitcoin price was riding high with a $750 conversion rate, compared to the $580 at this report.
The high barrier to entry, coupled with the tumultuous market and a certain amount of trepidation about buying bitcoin from the feds could have all contributed to the auction’s weak turnout.
Featured image from Shutterstock.
Last modified: July 13, 2020 3:14 AM UTC