February 6, 2014
Welcome to part three of the four part series asking Bitcoin experts to share their views on what the future holds for Bitcoin. We look into the following:
- How the regulation around Bitcoin will evolve over the next 12 months
- The processes needed to get the mainstream to adopt Bitcoin
- What impact the FBI’s supply of Bitcoin will have on the ecosystem
- The big question; What will Bitcoin be trading at in 12 months?
In part three we look into the impact the FBI’s supply of Bitcoin will have on the ecosystem. Here’s what the experts had to say:
Ash Moran, Co-Founder of Bitcoin Manchester responds:
In the long term, I don’t think this will make much of a difference. The coins will end up distributed more evenly, which can only be a good thing, as a small number of people control a significant proportion of the Bitcoins in existence.
In the short term, it could be quite fun. At current market depths, if 30kBTC was suddenly dumped on the exchanges, there would be a massive price crash.
I’d be surprised if this happened though, since I can’t see them being auctioned that far below market rate. (Unless it turns out nobody wants to own coins traceable in the blockchain back to the FBI…).
Eric Calouro, Founder of NewsBTC responds:
It really depends on who acquires the bitcoin from the authorities. By that I mean whether that sell it off in huge chunks, in smaller segments, or hold it.
Developer/Webmaster of CryptoHits responds:
It looks like the FBI has about 30,000 BTC they are going to be auctioning. Will be interesting to see how much they go for. At an assumed market price of 1 BTC = $1000 USD they would be valued at $30,000,000
Of course, There is nothing saying they cant just undercut the market and sell them off in smaller amounts.
I could see some of the CyberCrime guys perhaps attempting to trace and follow their usage throughout the blockchain.
Frank Schuil, CEO of Safello responds:
My best guess is that those reserves will be sold off at an auction off the regular exchange markets. Hence the direct impact I expect to be limited.
For the ecosystem as such it is a government body selling off an asset that has no legal status, if anything that is a positive signal as it would never happen with a truly illicit good like drugs.
Vitalik Buterin, Founder of Bitcoin Magazine responds:
The FBI is not going to dump all of their coins on an exchange. They are going to sell them using the same standard process that they use to sell everything else.
The impact on the Bitcoin economy will be light and drawn out over time.
Also, it is important to point out that the FBI is only free to liquidate 25000 of their 150000 coins; the remainder will likely stay locked up for a long time.
Kenneth Metral, CEO of Coingig responds:
As I speculated, the FBI is proceeding to liquidate the seized Bitcoins.
However, I believe that this action will not impact the ecosystem because the demand for bitcoins is an all-time high given its valuation, wide media coverage and the fact that the general public has an interest in Bitcoin that’s been greater than ever.
Peter Seed, CEO of Tradefor responds:
I believe that the FBI liquidation news will have a downward pressure on Bitcoin exchange rates.
The ruling that allowed liquidation related specifically to the seizure of the Silk Road assets estimated to be around 30,000 BTC (there is an additional 133,000 BTC in limbo awaiting a civil action).
The FBI will likely dump all seized coins at auction prices as no U.S. exchange can handle that kind of volume. This will temporarily increase supply, thus, reducing prices in the short term.
Mike Yeung, Founder of SFU Bitcoin Club responds:
I can’t see any negative consequences for Bitcoin’s growth if the FBI decides to sell their stash. If the FBI dumps it all at once for a penny per coin, the market will dip for a bit. But now there are more coins in the hands of new users than ever before.
Nubis Bruno, Co-Founder of Conectabitcoin responds:
I think right now it’s in their best interest those bitcoin stay put. Although the FBI does not seem to be campaigning against Bitcoin, they know it’s money being publicly audited, and can only be used towards a legitimate purpose, therefore if it is in their legal right to use that money, it’s going to constitute the most seamlessly transparent use of public money ever recorded and people may start asking all public money to be used that way.
They could potentially start a FUD campaign and claim Bitcoin is not safe and that their money was stolen, but it may backfire making them look incompetent.
The amount of bitcoin equals the volume of 1~2 days in the current market, a raw dump attempt would be noticed but it won’t affect the long term trend, there is just no way they can liquidate all those bitcoin without people noticing a dump scheme, all eyes are on them.
Simon Edhouse, Managing Director of Bittunes responds:
In the most basic sense, this only tends to validate Bitcoin as a fungible and real currency. However, I don’t think the impact will be that significant apart from increasing supply of BTC in the marketplace.
It also begs the question of what should be done with funds that are apparently the result of illicit activities. Perhaps they can be donated to a worthy charity?
Alena Vranova, CEO of SatoshiLabs (TREZOR) responds:
To see the FBI having decided on the sales of Bitcoins is definitely a positive sign that the federal state sees Bitcoins as a valuable asset.
The impact on the market price depends on the quantities and the pace of the sales.
Certainly an open market proposal of 29000 BTC can create a turmoil in the market but I believe that even a steep fall would recover within few weeks.
The US government is well aware of that so I’d guess they will choose a more conservative way of conversion.
Jeremy Bonney, Product Manager at CoinDesk responds:
This will depend greatly on how the FBI decide to liquidate their bitcoin, what rate they decide to sell at, who they sell to and how they sell it. Because it is such a high volume, there are likely to be strong effects on the overall bitcoin price.
Johnathan Turrall, CTO of MetaLair responds:
If they were to dump the confiscated BTC holdings into the market I don’t think it would have much long term impact on the economy or the price.
I think if they did though it would be an opportunity missed for the US government at the beginning of a new era of finance.
There are so many sub departments and fiefdoms within governments with each making its own policy decisions that it’s often very hard to coordinate anything with a sensible long term view.
Aaron Williams, Founder of Atlanta Bitcoin responds:
This isn’t the last we’ve heard on the issue. I think we’ll see more confiscations and certainly some challenges to them in court. It will be interesting to see how this plays out.
Alan Donohoe, Founder of Bitcoin Association of Ireland responds:
Like any marketplace, the value of is driven in large part by supply and demand.
New bitcoins are added to the system at a mathematically controlled rate, buying & selling activity varies wildly with overall market sentiment, the increasing global awareness, and external factors like changing government regulation will of course have an overall affect on the market.
By my calculations the FBI are now holders of over $100 Million worth of Bitcoins. When there’s more buyers than sellers, the price goes up, the reverse is also true.
If the FBI are to release all theses Bitcoins at the same time it will send shockwaves through the Bitcoin market, and lead to a frenzy.
The FBI should release the Bitcoins in small batches to avoid any negative effects of such a massive liquidation. We will certainly see some fluctuations, but the market will recover.
Ron Gross, Mastercoin Foundation Executive Director responds:
The expected FBI liquidation is perhaps the only thing keeping the price as low as $800-$850.
There is a huge wave of positive news lately between Overstock, eBay, Google, … it’s hard to keep track.
Once the liquidation completes, this specific question mark will be resolved. Of course we might see some major volatility soon … just like at any other time during Bitcoin’s short history thus far.
Max, Co-Founder of Bitcoin Manchester responds:
Nothing. It will be sold off market in batches. A large investment firm will probably take a large number of them at slightly below market rate.
We already seen firms like Exante buying off market to supply their fund (I think they hold around 70k BTC).
Vytautas Karalevičius, CEO of Spectro Coin responds:
It shows that FBI does not have any doubts about legitamance of Bitcoin, as other ways these assets would be destroyed or put on hold.
Secondly, there should be no significant effect on bitcoin price as this sale should be treated as increase in supply as supply is increasing from miniging activities and should be already reflected into the price.
However, this sale of assets will most likely will be done in small chunks between random periods of time to maximize gain for US Marshals, similar in a way when financials assets are sold.
Esther Tung, member of The Bitcoin Co-op responds:
If they want to keep hanging onto it, then my bitcoins are worth more, all the better. If they flood the market with it, then someone gets to buy bitcoins really cheaply, all the better.
The U.S. has come out with quite a positive response to Bitcoin so far though, so either way it’s unlikely they’ll try to devise something ominous to do with them.
Antony, Business Development at itBit responds:
I think there are a few effects that could be seen. Firstly the price action will depend on how they liquidate.
If value is the priority, they might want to trickle it into the market to minimize the impact on price; on the other hand, a large, fast firesale could cause a temporary negative dislocation.
In the medium term when news is out that the assets have been liquidated, this should be positive as buyers who have been waiting on the sidelines can join the market again.
Additional liquidity which has been locked up so far, is also positive for the market.
Alan Silbert, CEO of BitPremier responds:
If they are starting to liquidate their bitcoins, this could be a drag on the price for the short to mid-term. Depends on how much they are trying to liquidate and at what pace.
But nevertheless, it increases the supply of bitcoins on the market to offset what has been more dominated by demand historically.
Teemu Päivinen, CEO of Coinmotion responds:
Depending on how the FBI’s liquidation is carried out, the impact on the economy can be anywhere between slight and catastrophic. The big question is wether the FBI will use an exchange or just auction off the Bitcoins independently.
Most likely the Bitcoins will be auctioned off slowly over a long period of time, which would, in theory, bring the price of Bitcoin down.
This choice not to upset the Bitcoin economy would, however, be seen as the FBI taking a positive stance on the virtual currency. This would in turn lead to positive demand mitigating the effect of the sale.
Michael Dunworth, CEO of snapCard responds:
I think people are getting extremely educated on what Bitcoin can offer the world. With that being said, any liquidation would quickly be corrected by the market of buyers.
Paul Draper, CCO of CoinMama responds:
We think that if the FBI decides to sell by the rules of demand and supply the price will go down (the market is already considering that to be the scenario, so we don’t believe there will be a mass selling).
There is a bright side to this story, if the FBI decides to sell their Bitcoins, it’s kind of an informal approval of use.
After taking that step, they won’t be able to say that Bitcoin is illegal, will they? Users will be able to argue that they bought Bitcoins from the FBI, why would the FBI sell something illegal 🙂
Mark Norton from Bitcoin Warrior responds:
We still don’t know when or how the FBI is going to liquidate these assets. They can either try to sell them, all at once, on the open market, which will temporarily crash the price, or they will auction the bitcoins in lots, which won’t.
It’s my personal bet that they will sell them in lots at auction since that is how they usually dispose of seized goods. If this happens, it will be a good buying opportunity.
It will also be a media frenzy, which will be good for the economy since it will introduce even more people to what Bitcoin is. It will also be damn entertaining to watch.
Even if they were to try to sell on an exchange, the price crash would be a huge buying opportunity which would immediately bring the price back up, and, again, cause a media frenzy. Either way, I see this as helping Bitcoin grow.
Now the question is, what will happen when they try to unload the other 144,000 bitcoins on Ulbricht’s computer.
Daniel Mross, Director of The Rise and Rise of Bitcoin responds:
I’d probably be more concerned if they decided to keep the coins than sell them. If and when they do, I don’t think it will have any real impact on the market other than some speculative bumps, but I’m sure it will make some sensational headlines.
John Delono, Founder of Bitcoin Reviewer responds:
The FBI is one of the largest holders of Bitcoin, and I believe that it is in their best interest to encourage the growth of the Bitcoin economy, allowing it to maintain its value.
When their stockpile is auctioned off, it is likely going to introduce Bitcoin to people who have never heard of it before.
I think it’s great news that the government understands Bitcoin itself is legal, and can be used legally.
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