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Australian government to auction off £8 million in bitcoin

The Australian police is preparing to auction off 24,518 bitcoins that were confiscated from a Melbourne drug dealer in 2013.

In total the bitcoins are worth around £8 million but they will be sold in blocks of 2,000 to prevent the market from being adversely affected by the sale of such a large amount of the digital currency at one time.

Each block has a market value of around £680,000 and quite a large sum of money could be earned from the auction that the audit firm Ernst & Young will be organising this June.

Garrick Hileman, an economic historian at the Cambridge Centre for Alternative Finance, offered insight into how large of a number 24,518 bitcoins really is: “This is a significant amount of Bitcoin. It's about a week's worth of new Bitcoin that comes onto the market through mining.”

According to Hileman, the Australian authorities have picked an appropriate time for the auction since some uncertainty exists in regard to what the value of bitcoin will be in July: “Generally the view is that any time 10,000 bitcoins sell, the market price can be moved significantly. The Bitcoin protocol is designed to reduce the number of new bitcoins miners are given as a reward for processing transactions every four years.

"The reward will be halved on 14 July, so prices could go up due to the reduced supply of new bitcoins. But there is a question about whether security could decline, if rewards for miners are reduced significantly. So it's a safe time to sell, as there is no guarantee about what might happen in July.”

The auction will be the first time that bitcoin has been sold on the open market outside of the US. In 2014, 175,000 bitcoins that were confiscated from the founder of Silk Road were auctioned off by the US Marshals Service. The implications of a government selling Bitcoin on the open market are quite large as in doing so the Australian government is recognising the sale and use of the digital currency as legal within the country.

Bitcoin has matured as a digital currency and hopefully Australia's auction this summer will help it gain further credibility.

Image Credit: Julia Tsokur / Shutterstock

Anthony Spadafora
After living and working in South Korea for seven years, Anthony now resides in Houston, Texas where he writes about a variety of technology topics for ITProPortal.