As institutional investors enter the bitcoin market, there is an increasing demand for more robust exchanges.
Reuters
Bitcoin watchers today will be anxiously waiting for the results of an auction of 30,000 bitcoins seized last year as part of the Federal Bureau of Investigation’s
crackdown on the Silk Road online marketplace for illicit drugs.
The price for a bitcoin on Friday when the bidding occurred was around $570.
The price of bitcoin this morning is close to $630, according to blockchain.info—a main bitcoin transaction database.
The bidding, by major hedge funds, law firms, bitcoin businesses, and others, occurred last Friday. Results are expected Monday.
While no formal announcement is expected by the US Marshall’s service, a number of the auction participants will most likely announce they have won bids and at what price.
According to blockchain.info, the market value of 30,000 bitcoin is $18.8 million.
According to the blockchain, there are now almost 13 million bitcoins in circulation, just over half of the total number that will ever be mined—21 million, for a current total market capitalization of $8.13 billion.
Jeremy Allaire, founder,
Chairman and CEO of Circle, a bitcoin consumer finance company, said in an interview in London on Monday morning that the auction results will create only a short-term price dip in the market.
“The government is doing it in a very controlled manner; they’re not flooding the market. They’re creating an opportunity for institutional investors, which is a big deal,” Mr. Allaire told The Wall Street Journal.
Mr. Allaire’s Circle was a bidder. He said he was awaiting a phone call and email later Monday from the US federal government. He wouldn’t disclose what price his company bid for the bitcoin.
Allaire said there was significant market interest in the auction. “This is classic asset forfeiture. They’re washing these bitcoin clean, with the seal of approval of the US federal government.”
For large market participants, whether they be financial intermediaries like Circle or hedge funds that are investing in it as an asset, the auction is a market opportunity to potentially acquire large blocks at a discount.
Allaire said that while there was still regulatory uncertainty around bitcoin, the “clouds were parting,” with governments, banks, and traditional institutional investors beginning to take a serious interest in the cryptocurrency.
“What we’re hearing is that some of the big broker dealers on Wall Street are setting up small trading desks just to get exposure to the asset and understand it. That’s the approach now as opposed to a year ago when people thought governments would never allow it, and banks just wanted it to go away. All of the major banks now have teams trying to make sense of bitcoin,” he said.
As institutional investors enter the market, there is an increasing demand for more robust exchanges that can support those institutional investors, Mr. Allaire added.
“A year ago, most governments and big banks frankly just wanted bitcoin to go away. They were like: ‘this is a joke, I want this to go away. I’m just going to ignore it.’ It’s not going to go away. So now people are saying: ‘it’s not going away and there’s big money coming into this, this is a real innovation, we need to get our heads wrapped around it, and we need to figure out whatever rules we’re going to wrap around it,’” he said.
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