Bitcoin Price Falls Below $600 as US Government Prepares for 30,000 BTC Selloff

The price of bitcoin on the CoinDesk US Bitcoin Price Index (BPI) declined on 12th June to a low of $568.87 after reaching a high of $634.38. The dramatic price swing, however, was followed by a slight recovery to $582.29 at press time.

The price decline began at 13:00 (UTC) before accelerating sharply at 19:00, dropping from $616 to the day’s low. However, by 22:30, USD bitcoin prices rallied to $592.77 before declining again to press time levels.

The decline coincided with the US Marshall Service’s announcement it will be initiating an auction of 30,000 BTC confiscated from the infamous online black market Silk Road. The sale is expected to be held on 27th June from 06:00 to 18:00 (EST).

Though volatile prices are a common occurrence with bitcoin, the recent slump can likely be attributed to varying sentiment for what the government’s bitcoin auction may mean for the bitcoin economy, as evidenced by community posts on reddit.

Silk Road auction

An auction-style sale of a massive amount of bitcoin, to be sold mostly in nine blocks of 3,000 BTC, could be problematic for the price in the short term, depending on sentiment.

For the cryptocurrency industry, this situation is unprecedented, despite similar reactions to past announcements regarding the potential sale of seized Silk Road bitcoins.

Individual investors may watch the situation closely, and make decisions whether to buy or sell BTC based on the finalized auction winners. These investors, who must commit $200,000 to participate in the auction, are expected to wire US dollars to the government on 1st July.

The published prices of the eventual sales could have anaffect on overall prices. This is suggested by the historically strong reactions to news surrounding the Silk Road case, though this will remain to be seen.

Positive sentiment

Bitcoin has seen a relative run-up in price recently, bolstered by promising consumer adoption stories and strong community showings at major conferences.

Three month historical price of bitcoin. Source: CoinDesk BPI

In late May, bitcoin broke the $600 barrier, which had not been surpassed since March, when negative news regarding regulation in China drove prices below the $500 mark.

The recent increase comes at a time when many large public companies, such as DISH Network and Expedia, are announcing acceptance of bitcoin as a form of payment.

It remains to be seen whether this latest news will mark a reversal in this trend.