The final Silk Road auction: the end of an era

Wednesday 11 November 2015

It’s the end of an era: no more Silk Road coins. But what does it mean?

The final batch of coins liberated from the Silk Road by the FBI have been sold. The auction, which took place on 5 November, saw 44,000 bitcoins sold in 22 blocks of coins - 21 blocks of 2,000 and one of 2,341.

Read also: Bitcoin is not for the big guys

Tim Draper

Tim Draper perfected his fixed smile as his 30,000 bitcoins dropped from $700 to $155 each

This time, there were 11 bidders, a far lower number than before. In the first auction, back in June 2014, 30,000 bitcoins went under the hammer. There were 45 registered bidders, but venture capital investor Tim Draper took all 30,000 at an estimated price of $700 each. (Yes, he’s probably been kicking himself for most of the last year.)

The nature of bitcoin and the auction is such that details were not released until the next Monday, following an ‘evaluation process’ after bidding. New York exchange itBit revealed that it successfully bid for 10,000 coins, whilst Genesis Trading bid but failed to win any tranches.

No information about price is released as a matter of course, though in the past some details have been leaked and the sum paid by bidders is a matter of hot dispute and speculation. The reason, of course, is that it provides a signal to the market. If a bidder pays over market price, that is a measure of confidence from Big Money. If below, well, perhaps it’s not quite so promising, at least in the medium term.

Since this one is the last batch of coins, auction watchers are paying closer attention than usual, trying to read into it all that they can. However, it would be unwise to do so, for a number of reasons.

Firstly, it’s clear that these auctions are not good indicators of market sentiment. Tim Draper’s epic 30,000 BTC purchase at above market rates occurred six months into a 22-month downtrend. He could have picked up three times as many if he’d shopped later. That wasn’t the best bellwether, let’s face it.

Secondly, these are special coins. Bitcoins are fully traceable, if you go to the trouble, and it’s possible that some of the ones you deal with have passed through less-than-reputable hands. That could potentially come back to bite you, especially if you’re a big, high-profile organisation and you’ve bought from an unregulated source. But these auction coins are whiter-than-white, laundered by the US government. They are by definition shiny clean. That demands a premium.

Thirdly, the days of interest in bitcoin auctions are coming to an end for a reason. We now have regulated exchanges that provide facilities to buy large tranches of bitcoins within an approved framework. These just didn’t exist last summer.

TL;DR the Silk Road coins have been sold, but don’t read too much into it.


comments powered by Disqus