It can be proven time and time again through various examples. Unfortunately, the best examples are based on sells from bad news: Mt. Gox, China Bans, etc. However, market manipulation is alive and well across all digital currencies; even Bitcoin. With the recent dip in value, the question remains: Is this due to the United States government?
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Recently, news spread that the United States planned to auction off nearly 30,000 confiscated Bitcoin by the FBI from the infamous Silk Road, a deep web community for buying and selling drugs. Almost immediately, the value of Bitcoin dropped $60 as the sell walls poured in.
Wealthy patrons have already begun to take notice, as was leaked by the United States governments through an email stating the personal information about everyone who had inquired about the auction. While the market has fluctuated in the past few days, there is a sense in the Bitcoin community that potential investors are pushing the value downward in order to attain cheap coins.
While this hypothesis can’t be proven due the Bitcoin’s anonymity features, it can be speculated. The price has hovered around $600 for days, and has shown no indication of rising. Traders can easily speculate, with reasonable suspicion, that current Bitcoin investors looking to make headlines may buy more Bitcoin at a cheaper price from the United States.
With the recent leak of information about potential bidders being released, it’s no secret that the Bitcoin community provides a public relations frenzy. While a Yelp investor was interested in the auction, the company got a load of attention from the community. In the past, companies like Overstock.com and Gyft.com has seen phenomenal gains in attention since their announcement to accept Bitcoin. At this point, Bitcoin faces a challenge of whether or not to be used as currency, or a marketing ploy.
“Mark my words. These will sell at least market price,” a trader on Reddit’s own /r/BitcoinMarkets commented. This sentiment provides a basis for speculation from a majority of the Bitcoin community. The price may be pushed down due to the desire to buy cheap coins.
Of course, this is always a threat to digital currency. Pump and dump schemes are so frequent that they’re taught and traded upon, but when you involve very interested parties looking for ways to capitalize on Bitcoin in the public spotlight that leads to a very different market game. Now the pump and dump schemers have the large investors looking for press on their side.
Now obviously this is not something that can’t be proven for most companies. However, companies like SecondMarket have fully expressed intent to participate in the auctions through email. On June 20, 2014, SecondMarket sent out this email:
Subject: IMPORTANT ANNOUNCEMENT – Opportunity to Participate in US Marshals Bitcoin Auction via SecondMarket
Body: As you may be aware, the U.S. Marshals Service is planning to auction off approximately 30,000 bitcoins. SecondMarket intends on participating in this auction and is allowing qualified customers to submit orders for aggregation into bids to be submitted by SecondMarket in the auction process. Participation through SecondMarket will generally be simpler than direct participation in the auction:
Smaller minimum bid size ($50k versus ~3,000 bitcoin blocks)
Lower upfront capital commitment (bid amount versus $200k deposit plus proof of funds)
Support for multiple bids at different bid prices with smaller minimum sizes
Private participation in the auction (bidder identity will not be revealed to the U.S. Marshals office)
Open to non-US investors
Full details and instructions can be accessed on the SecondMarket platform. To learn more and to participate, create an account on the SecondMarket auction portal. If you already have an account, simply log into the SecondMarket auction portal. Please note that an account on the SecondMarket portal is separate from the New Account Profile (NAP) that you may have filled out with us in the past.
The order deadline will be Thursday, June 26 at 12pm ET by which time all submissions must be complete including receipt of wire payments for bid amounts. All orders in place as of Thursday, June 26 at 12pm ET will be deemed fully binding and irrevocable.
Please note that ten percent of all auction fees received by SecondMarket from successful syndicate participants in the auction will be donated to the Electronic Frontier Foundation, a nonprofit organization supportive of bitcoin and more broadly dedicated to promoting technology, innovation and the protection of rights in the digital world.
SecondMarket and the Bitcoin Investment Trust
“This screams that SecondMarket wants to buy them all, in my opinion,” another trader said, “or maybe they’re trying to judge interest.”
With so many potential investors looking to step foot into Bitcoin in the public light, value is an important thing to look at. Investors of this caliber aren’t stupid. They want to get the most out of their money. In fact, most of them are looking for these Bitcoins to go below market price. The lower the market price, the lower the coins sell for.
If a company or investor wanted to make a serious decision to get into Bitcoin, they wouldn’t buy them through an auction by the United States. They’d learn the process and go through an exchange, unless they were looking to get the coins for cheap along with valuable press coverage. This leads some to believe that they understand the Bitcoin process.
This upcoming auction is speculated to either keep the price at $600, or drop it even lower the benefit investors. It’s advised that you pay attention to the news, and watch who is looking to invest. Each investor may have ulterior motives that may affect the price.
Disclaimer: I do hold Bitcoin, but am not an investor in the upcoming auction.
Photo from Flickr.