I love the assumption that just because they didn’t win they must have been outbid.
That could be the case.
But it could also be the case that winners are not coming forward because there aren’t any. And that’s mostly because the whole auction was a sting.
I find this a surer explanation than the idea that the auction cleared at a ridiculously above market price level because new entrants were so keen to overpay for size.
For, if I was the govt stuck with a bunch of bitcoin i couldn’t shift because everyone knew my coins were the Silk Road batch, I too might be inclined to “launder” the association away via a sealed auction that would make everyone assume that the coins were no longer on my book but actually still were. Especially if the process also provided me with great information about prospective bidders. Much easier than buying stock in the market directly in any case.
Not only would I then be free to use the coin as I saw fit, I could use it in a way that allowed me to operate undetected in the shadowy bitcoin illicit service mkt.
Which is why until a bona fide winner comes along and openly declares himself a winner and proves he got the coins, I remain suspicious of all “we were outbid” announcements.
Especially since there’s a whole other level of bluff and game theory to consider. Real winners (especially if the price was lower than expected) have every incentive to announce they were not rewarded (or that they were outbid) so as to offload the coin in the market at a favourable price.
It’s called talking up the mkt. After all, as far as I can tell, there is no requirement for winners to be honest about the outcome of their bids. They are providing this information voluntarily and with agenda.
If I won a house auction at market price and knew noone could prove what price I really paid for it I’d have every incentive to indicate that my winning bid was much higher than it really was. Alternatively I could pretend I didn’t win at all when in fact I did.
The whole secret winning bidder thing is a wonderful ploy which has been used by auctioneers defending markets for years. The art market is perhaps the best example of this sort of thing.
The point is that nobody can trust any clearing price talk unless a) the marshals announce the price of the winning bid or b) a winner proves they were the winner by publicly disclosing the documentation proving that is the case.
Meanwhile, if a winner does come forward — or the marshals do eventually announce a clearing price well above market price — all that proves is that bitcoin is sooo illiquid that the premium for being able to transact in “size” is as much $100.
That’s not impossible. But it probably also means that there is a liquidity cost to offloading it in size as well.
What will be interesting is how these particular coins end up travelling through the bitcoin economy and whether they eventually do get stigmatized due to their government association anyway?
Game theory. You’ve got to love it.
Some quick very speculative math based on what we do know. Please do correct if I have got any of the logic wrong.
There were 63 bids by 45 registered bidders. Each bid requires a 200k deposit. That means about $12.6m worth of actual deposits were transferred for stock that should have been worth approx $17.7m during the time of the auction. Whilst those deposits are not necessarily indicative of absolute value — because a deposit doesn’t reflect total transaction capability — the nature of the market is such that if you had x amount of capital to spend on bitcoin you would have an interest in submitting as many bids as you have the capability of making deposits.
Thus I would say the $12.6m number is possibly a fair indication of what was close to minimum market demand. Based on that figure alone I think we can deduce that the clearing price could not have been lower than $424 per bitcoin. Based on the same information, and presuming that all bidders had at most $190k in spare purchasing power (because if they had $200 they would have provided another bid) we get to a maximum demand number of $24.6m, which works out to be $829.
That gives us a range of $423-829.
However, that top figure should really be adjusted for the fact that there were only 45 registered bidders and 63 bids, meaning at least 18 of those bids don’t reflect additional purchasing power on a per bid basis because that purchasing power was expressed in already expressed in a new bid. In which case you arrive at a max demand point of $21m which takes you to a maximum bid potential of $708.
Which gives us an indicative market mid-point of $525, which I would say could be a fair proxy for the real clearing price. That is also congruent with where the market was trading at the time of the auction (in a way that accounts for the additional supply coming to market).
Bring on the FOIA requests in any case.
Update: one deep pocketed winner, with an interest in declaring himself (albeit not the level of the winning bid) has come forward. The US marshals have confirmed only the fact that there was a single winner, but not his identity. If it’s a bluff it’s a fanciful one. At this stage Occam’s razor comes into play.
My logic above meanwhile was totally flawed. Not sure what I was thinking. Something about figuring out $ demand from provable funds chasing finite stock. It was late and I was distracted. It seemed so logical in the wee small hours of the morning. The minimum bid, of course, was for one block of less than 3000 bitcoin, not the full amount. And since it was a multiple auction the quantity could be adjusted. The fact that there were more bids than registered bidders simply meant that the same entity could use the unencumbered differential to bid multiple times.
This is a deep pocket story.