By Kathleen Caulderwood - Last October, federal agents shut down Silk Road and seized its assets -- about $4 million worth of Bitcoin (BTC-eUSD), and a few months later hackers stole hundreds of thousands from the world’s biggest marketplace, many of which will likely never be recovered.
The price of the virtual currency has been in constant flux since it came to life in 2009, ranging from just a few pennies to more than a thousand dollars. High-profile heists and government shutdowns haven’t helped.
But bidders are lining up to participate in a government auction today, to get a piece of a possibly shrinking global supply.
Of the 850,000 bitcoins stolen back in February from Mt. Gox, Mark Karpelès, head of the now defunct exchange has only been able to recover about 200,000.
“As the company head, my mission was to protect customers and employees,”, said to The Wall Street Journal, from his apartment in Tokyo. “I’m deeply sorry. I’m frustrated with myself.”
Earlier this month, officials approved Mt. Gox’s application for bankruptcy protection of its U.S. assets, and Karpelès said he plans to auction off domain names like bitcoins.com to help pay off the debt and keep business running, but does’nt think any more missing coins will turn up.
But that’s not turning off firms who plan to participate in a 12-hour government auction Friday, in which U.S. authorities will try and sell nearly 30,000 bitcoins recovered during the Silk Road shutdown.
Potential bidders include investment firm SecondMarket, Bitcoin Investment Trust, Binary Financial and Pantera Capital, according to a list leaked earlier this month.
“It’s just one of those big plays that you have to be involved with if you’re a big player,” Binary Financial managing partner Harry Yeh said to Coindesk, adding that they may end up selling for up to 20 percent below market value.
Analysts disagree about what the action will do to prices.
“Selling bitcoin with its somewhat liquid market is not the same as auctioning off a 1998 Chevy with a couple of bullet holes in the driver’s door,” said Citigroup research analyst Steven Englander in a Wednesday note.
All bidders had to be vetted by authorities, prove their identities and that they had $200,000 in cash and not affiliated with Silk Road, according to The New York Times.
“The U.S. marshal specifically has never had to auction off this type of asset,” Wedbush Securities analyst Gil Luria said to the Times. “They’re figuring it out for the first time, and maybe that’s why the process hasn’t been completely transparent.
It’s the first time bitcoins have even been auctioned in this way, which is why only a fifth of the total government supply will be sold today, as a kind of test run. Participants will be able to bid on lots of 3,000.