SecondMarket captures 48,000 BTC in US Marshals auction

Tim Draper

On Monday we reported that venture capitalist Tim Draper had won 2,000 Bitcoins out of the 50,000 BTC held for auction last week by the US Marshals Service. The Bitcoins up for sale were among thousands that had been seized from the defunct online bazaar Silk Road.

It has since been reported that SecondMarket, a New York-based exchange, made a successful bid on the remaining 48,000 BTC.

“Obviously, we’re very thrilled with the results,” said Brendan O’Connor, SecondMarket’s managing director of trading, to the New York Times. The exchange was founded by Barry E. Silbert, who operates the Bitcoin Investment Trust investment fund.

Last week’s auction marked the second sale the US Marshals Service has held for Silk Road-seized Bitcoins. In June, the service auctioned off nearly 30,000 BTC, all of which had been won by Draper.

Drawing far fewer bidders than did the June sale, last week’s auction has raised questions about whether the appetite for Bitcoin among investors is waning, said the Times.

The newspaper reported that at the time of last week’s sale, Bitcoin was trading at approximately $370 US, far below its peak of about $1,150 a year ago and approximately $200 below its value at the start of the first sale in June, according to CoinDesk’s Bitcoin Price Index.

“The demand is starting to dry up,” said David L. Yermack, a finance professor at New York University’s Stern School of Business, to the Times. “I think a lot of the excitement may have bled out of investors.”

Bitcoin’s wild price swings, which analysts had argued were driven in part by speculative trading, have all but disappeared in recent months, said the newspaper. The price stability, in turn, might have further dissuaded opportunistic, short-term investors from taking part in the US Marshals’ auction, said Yermack to the Times.

In its report on SecondMarket’s successful bid, Reuters said Bitcoin’s volatility has been a major barrier to its growth.

“A lot of people are underwater in their Bitcoin positions this year,” said George Samman, chief operating officer of the Bitcoin derivatives trading platform BTC.sx, to Reuters.

“The Bitcoin story is not as hot as it used to be. The whole ecosystem is growing by leaps and bounds and Bitcoin is being accepted more widely, but the price keeps going down. To consumers in general, price matters.”

But others in the Bitcoin industry brush off the notion that the digital currency is no longer an attractive investment, said the Times. Industry experts say the fact that fewer bidders took part in the second auction is a sign the Bitcoin market is becoming more liquid.

“Volumes have picked up, so there are other ways to get larger trades relatively easily,” said Garrick Hileman, an economic historian at the London School of Economics who researches alternative currencies, to the Times. “The Bitcoin market has matured.”

When the US Marshals announced it would be holding a second auction, a spokeswoman for the service said at the time it anticipated selling the remaining Bitcoin seized from Silk Road in the months to come, but dates have yet to be set.

The promise of at least one more sale, however, have some in the Bitcoin industry concerned, said the Times. “Bitcoin is in a bit of a holding pattern, or a bit of a lull, and people may think that there’s more downward pressure on the price,” said Hileman. “Now, we’re onto the harsh reality of who wants to buy into another auction.”