A single bidder bought a large cache of bitcoins at an U.S. government auction, part of a larger pool of the virtual currency seized from the Silk Road website.
The auction attracted 45 bidders, including New York brokerage SecondMarket Inc., and 63 bids were submitted during the 12 hours of the auction on June 27, according to the U.S. Marshals Service. The agency, which said yesterday that it notified the bidder and transferred the money, didn’t disclose the winner’s identity.
The auction of 29,656 bitcoins, part of more than 144,000 the FBI transferred to U.S. Marshals after shutting down the Silk Road marketplace and arresting its operator last year, represented a rare opportunity to secure a large cache of the virtual currency. While the actual price of the winning bid isn’t known, the cache sold on June 30 was worth about $19 million at current exchange prices.
SecondMarket, Rangeley Capital, Pantera Capital Management, Bitcoin Shop and Coinbase Inc. said they were outbid in the auction.
Dan Morehead, chief executive officer of Pantera, said that the spectacle of the U.S. government auctioning bitcoins suggested that “supply creates its own demand.”
“The publicity created a tremendous amount of demand,” Morehead wrote in an e-mail. “We had several large new players bid.”
Charles Allen, CEO of Bitcoin Shop, said his company’s bid wasn’t accepted.
“As a mechanism to hedge our proposed investment, we also bid through the SecondMarket syndicate for a smaller allocation, but that bid was not accepted either,” Allen said. “We submitted a bid price that, if accepted, reflected our determination of a competitive and attractive value for our investors.”
Silk Road
Because liquidity on the exchanges is low -- a trade of 500 bitcoins can move prices -- the auction offered a chance to avoid paying a premium. More bitcoins may be sold later, U.S. Marshals have said.
The sale excludes bitcoins the government obtained from computer hardware owned by Ross William Ulbricht, who the U.S. said ran Silk Road. The marketplace was an online bazaar where anonymous users allegedly bought and sold heroin, LSD, phony passports and computer hacking services. Ulbricht is contesting charges and filed a claim asserting ownership of the bitcoins.
Price Rally
SecondMarket, which specializes in hard-to-trade assets, already runs a trust for investors that lets people buy bitcoins without the risk or technical complications of owning them directly. SecondMarket began raising money in September for the trust, which now has $62.5 million in assets and is seeking to open it to smaller investors as well.
Barry Silbert, SecondMarket’s CEO, wrote in a Twitter message that it was outbid “on all blocks” of bitcoin the Marshals auctioned.
The price of bitcoins skyrocketed in 2013 to $1,147 from around $12 as technologists and speculators flocked to the digital currency, before dropping sharply amid regulatory crackdowns in China, Russia and elsewhere. One bitcoin fetched about $644 yesterday, according to the CoinDesk Bitcoin Price Index, which represents an average of bitcoin prices across leading global exchanges.
Bitcoins, which exist as software and aren’t controlled by any single authority or country, emerged in 2009 out of a paper authored under the pseudonym Satoshi Nakamoto. Since then, retailers selling everything from hotel bookings to psychiatric services to luxury homes have started accepting bitcoins
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