The U.S. government lost over $6 billion in potential Bitcoin gains by prematurely selling 195,092 BTC from its holdings.
As of October 31, the U.S. government holds a staggering 210,429 Bitcoin, according to data from blockchain analytics company Glassnode. Yet, it could have had even more. A recent analysis indicates that the government has lost over $6 billion in unrealized gains by prematurely selling off a significant portion of its Bitcoin holdings. In essence, Washington has become the world’s second-largest Bitcoin investor, trailing only Satoshi Nakamoto, Bitcoin’s enigmatic creator.
The U.S. Department of Justice (DOJ) and the Internal Revenue Service (IRS) have unwittingly become one of the largest holders of Bitcoin. Through legal actions and confiscations, they’ve acquired a substantial amount of the cryptocurrency. Jameson Lopp, co-founder of Bitcoin custody company Casa, crunched the numbers and found that the government missed out on potential profits exceeding $6 billion. This lost value stems from the government’s decision to auction off 195,092 Bitcoin, a move that many consider premature.
Missed Opportunities and Market Ironies
The irony isn’t lost on crypto enthusiasts; the government could have been a major profiteer in the very market it often scrutinizes. Companies like MicroStrategy hold significantly less, with a Bitcoin treasury tallying 158,245 BTC or roughly $5.43 billion. This makes the DOJ the largest corporate holder of Bitcoin, whether they planned on it or not.
Interestingly, Glassnode’s data reveals that the government’s Bitcoin reserves have grown in line with major legal confiscations. For example, early in 2022, the DOJ’s Bitcoin holdings surged by nearly 100,000 BTC, then worth about $3.6 billion, due to legal actions against individuals implicated in a 2016 Bitfinex crypto exchange hack.
Not everyone is happy about the government’s role in the crypto market. Billionaire Tim Draper, an original bidder in one of the government’s Bitcoin auctions, recently criticized Washington for hindering the growth of the cryptocurrency sector. He argues that poor policies are negatively impacting innovation, particularly in tech hubs like Silicon Valley.
While the U.S. government remains a reluctant yet substantial player in the Bitcoin market, its decision to sell a large chunk of its holdings may go down in history as a multi-billion dollar mistake. This brings into question whether the government’s approach to crypto assets needs a strategic overhaul.