Why Did Only Five People Bid on the Feds' Bitcoin Stash?
Someone has purchased $1.6 million worth of bitcoin from the U.S. Marshals Service. That’s not a bad haul, and whoever purchased the bitcoins gets to hold on to some of the cryptocurrency seized from the illicit Silk Road marketplace. So why did only five people bother to place bids for the block of 2,700 bitcoins?
The USMS announced its intent to auction off the stash in a one-day event that ran for six hours on Monday. CoinDesk reported last night that someone did indeed place a winning bid on the stash.
The auction was the last related to the Silk Road bust that saw 144,000 bitcoins seized. Previously, the USMS sold 44,000 bitcoins to four winners; only 11 people are said to have bid on that $14.6 million block of bitcoins.
So why are people so hesitant to bid for these Bitcoin? It can’t be that they’re worried about a warning that Bitcoin’s underlying tech was being targeted by Chinese government hackers, as that warning was published long after the USMS started holding the auctions in mid-2014.
Perhaps it’s because venture capitalist Tim Draper bought all 30,000 bitcoins sold in the first auction by outbidding 44 other people. This could have scared potential bidders off because they feared they wouldn’t be able to match the amounts bid by people with pockets as deep as the Draper family’s.
Or maybe it’s because the feds wanted a $100,000 deposit for entering the auction. That’s a pretty high barrier to entry, and if investors like Draper already filled their digital coffers, the potential audience for this auction would be much smaller than previous auctions. Many of the cryptocurrency’s enthusiasts probably can’t afford a $100,000 deposit just for the possibility of buying up some bitcoins.
Another possibility is that Bitcoin might just not seem like a good investment. It was riding high earlier this year with a $750 conversion rate, but it’s trading at roughly $580 at time of writing. Mix the high barrier to entry, the tumultuous market, and probably a heaping helping of paranoia about buying the cryptocurrency from the feds and you have the makings of a boring auction.