What You Need to Know About Friday's $16.7 Million Bitcoin Auction

This Friday the U.S. Marshalls will auction off 29,656 bitcoins, worth roughly $16.7 million, they seized from the Silk Road website. Bitcoin is a volatile asset easily moving 5 percent or more on a day with no news. This auction will add additional volatility to the price.

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When

The auction period runs from 6:00 AM to 6:00 PM Eastern time on Friday. The winning bidder will be notified Monday June 30th by 5:00 PM.

What

Bidders need to have wired $200,000 from a U.S. Bank to the Marshals as a deposit to participate in the auction. There are 9 blocks of 3,000 coins and 1 block of 2656 coins. At today’s prices the smallest block has a worth around $1.5 million.

Who

Those large capital requirements mean bidders will either be wealthy individuals or organizations with U.S. bank accounts or group buys. Helping identify bidders the U.S. Marshals accidentally released a list of potential bidders email addresses. The list included bitcoin executives from companies like SecondMarket, Coinbase, DigitalBTC, Bitcoin Shop, and Bitcoins Reserve.

Implications

What we know is that the bitcoin price has been on a slide since the auction was announced June 12th, dropping about 15 percent. Coindesk and Forbes have written the price will continue to slide and there will be increased selling pressure on Friday. With respected articles like those and the slide that has already taken place there will probably be an additional drop in price through Friday.

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This drop is may provide an opportunity for bitcoin investors to pick up coins at a perceived discount as nothing has fundamentally changed about bitcoin as an asset.

Disclosure: At the time of this writing David Smith has a long bitcoin position.