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US Marshals Service to auction 'Silk Road' bitcoin valued at $17 million

The massive US public auction of bitcoins – a first for the US government – had little effect on the price of bitcoin, which plunged after China's central bank refused to recognize the virtual online currency in December.

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Jim Urquhart/Reuters/File
Some coins of bitcoin enthusiast Mike Caldwell are pictured at his office in Sandy, Utah, Jan. 31. The US Marshals Service said Thursday it will sell some 30,000 confiscated bitcoins during an online auction in late June. It acquired the bitcoin as a result of the bust of the online criminal marketplace the Silk Road.

The price of bitcoin took a slight tumble Thursday and Friday after the federal government announced it will auction off nearly 30,000 bitcoins later this month.

The US Marshals Service issued a call for bidders interested in buying some of the bitcoins obtained by the Federal Bureau of Investigation during the October bust of the online marketplace known as the Silk Road, which investigators say served as a clearinghouse for illegal goods.

The USMS plans to auction 29,657 bitcoins, valued at $17.4 million by the CoinDesk bitcoin price index, in blocks of 3,000 bitcoins on June 27. The auction will not include the roughly 144,000 bitcoins seized from the computers of the alleged-Silk Road founder, Ross Ulbricht.

The value of a single bitcoin varies according to demand, much in the same way that stock prices rise and fall. Since the cryptocurrency’s launch in 2008, the bitcoin price has fluctuated dramatically as users' faith has been repeatedly dashed and restored, frequently in conjunction with news events relating to bitcoin.

In December, a single bitcoin fetched nearly $1,200, a peak. That high didn’t last long, however. Within a month, the price plummeted nearly 40 percent after China’s central bank refused to recognize the digital currency. The currency recovered moderately in the weeks that followed, only to take a series of dives between January and April, especially after the Tokyo-based bitcoin exchange MtGox announced in late February that it had lost track of customer bitcoins valued at more than $400 million and was filing for bankruptcy.

In the past two months, bitcoin has been making a quiet comeback. Its value hit a three-month high of $665 on June 3. Thursday’s US auction announcement prompted yet another slide, to $565. The value recovered slightly Friday but continued to waver throughout the morning.

Skeptics have long suggested that the tenuous value of the bitcoin will make it difficult for the currency to gain much support in the financial community.

“It’s not surprising to see these sorts of fluctuations,” Ethan Mollick, a business and finance professor at the Wharton School at the University of Pennsylvania in Philadelphia, told the Monitor in November. “There’s nothing backing it. It’s just sort of a commodity based on hope and it’s going to be very volatile.

Bitcoin advocates counter that such dramatic fluctuations are the necessary growing pains of a new form of currency.

“Bitcoin right now looks like the Internet did in 1991” – a lofty promise, but hard for the public to grasp, Meyer “Micky” Malka, founder of Ribbit Capital and member of the Bitcoin Foundation, told Monitor Global Outlook last fall. “It took the Web browser to build a visual layer of what the Internet would be. I think that bitcoin is going through that same process right now.”

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