Crypto analysts, industry leaders, and observers have expressed strong criticism over the U.S. government’s decision to transfer $1.9 billion worth of Bitcoin to Coinbase Exchange earlier this week.
The move, which comes amid a significant bull run in the cryptocurrency market, has left many in the crypto community baffled. Observers point out that this decision is particularly surprising as the United States prepares for the inauguration of a crypto-friendly president, a factor believed to have fueled the recent rally.
“A Huge Strategic Mistake” – Jason Lowery
Jason Lowery, a United States Space Force major and crypto author, described the sale as a colossal strategic error, suggesting it reveals the current administration’s lack of understanding of Bitcoin’s true value.
“This is a huge strategic mistake. There is no price where it makes sense for the U.S. to sell any #Bitcoin it controls. They clearly don’t understand what they own, and this proves it,” Lowery tweeted.
He went on to warn of potential future repercussions, referencing Executive Order 6102 from 1933, which prohibited the hoarding of gold and speculating that a similar action might be taken to reclaim Bitcoin sold due to ignorance of its significance.
Coinbase CEO Weighs In
Brian Armstrong, CEO of Coinbase, also expressed skepticism over the sale. While addressing queries about Coinbase’s Bitcoin holdings, Armstrong highlighted that about 25% of Coinbase’s net balance sheet is held in crypto, with roughly half of that being Bitcoin.
He added, “Most of our liabilities are still denominated in dollars, so it’s about managing risk. We’re not a hedge fund. What percentage do you think it should be? There’s an argument it could be higher, but it’s a question of how much and why.”
Government Bitcoin Transfers in 2024
This year alone, the U.S. government has transferred approximately $2.49 billion worth of Bitcoin, amounting to 25,999 BTC, to Coinbase. However, analytics platform Spot on Chain suggested that these transfers might be related to custodial activities rather than outright sales.
According to Spot on Chain, the U.S. government still controls approximately 183,850 BTC across known addresses, valued at around $17.7 billion.
Market Reaction
The flagship cryptocurrency, Bitcoin, saw a minor dip following the transfer, dropping 3% to trade at $94,500 before correcting to $95,368 at the time of reporting.
The German government was the last major state to sell Bitcoin, offloading over 50,000 BTC at an average price of $57,200.
Implications and Debate
The U.S. government’s decision to sell Bitcoin amid a bull run has sparked a broader debate about the strategic management of cryptocurrency holdings by states. Critics argue that such sales could undermine the long-term financial and strategic benefits of holding Bitcoin, especially as its adoption and value continue to grow globally.
