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US Government To Convert Silk Road Bitcoins To USD
angry tapir writes "The founder of the Silk Road underground website has forfeited the site and thousands of bitcoins, worth around $28 million at current rates, to the U.S. government. The approximately 29,655 bitcoins were seized from the Silk Road website when the Federal Bureau of Investigation (FBI) moved to close it in late September. 'The United States Marshals Service shall dispose of the Silk Road Hidden Website and the Silk Road Server Bitcoins according to law,' wrote Judge J. Paul Oetken, of the U.S. District Court for the Southern District of New York, in a court order that was issued this week. The ruling represents the largest-ever forfeiture of bitcoins. 'It is the intention of the government to ultimately convert the bitcoins to U.S. currency,' said Jim Margolin, a spokesman for the U.S. Attorney's office for the Southern District of New York."
You arguments about Bitcoin's level of acceptance can be equally applied to PayPal in 1999. There where almost no sites accepting PayPal balance and you certainly could not pay your groceries and rent with PayPal. If someone sent you money with PayPal, all you could do was withdraw it to your bank account in local currency and that was about it.
While I'm not claiming Bitcoin is comparable to PayPal, you arguments are weak. Bitcoin is already serving niche markets that can't take PayPal, say online drugs. It also enables deals that would not have been possible with reversible payment methods. Between the high fees of Visa, NSA's prying eyes and PayPal's overall suckiness, cryptocurrency like Bitcoin really has place.
Should you "invest" in Bitcoin ? Probably not.
You're running into one of the properties of BitCoin here - it's not anonymous, it's pseudonymous. You can't hide the transaction history of a given coin, because that's how BitCoin works - it's a single vast verifiable public transaction log. If someone doesn't want to accept coins that passed through a particular wallet, then it's easy to verify this. And if there are enough people who won't touch Silk Road coins, then their value will be dubious to the people who ordinarily would.
It's impossible to "launder" BitCoin for this reason - you can always trace the entire transaction history for a given coin or subdivisions thereof.
That said, I think it's unlikely that people will turn them down.
540K is the total number of bitcoins moved by the network, including coins shuffled around between wallets of the same persons. It has nothing to do with trading volume.
If you tally up all daily volumes listed here in the last column: http://bitcoincharts.com/markets/ you get about 40K bitcoin traded daily. Bear in mind that most of that is daytrade, money circulating inside the exchange with equal buying and selling pressure. That statistic is also impossible to verify, many exchanges publish fake volume data to bolster perceived market share.
A 28K exit into dollars will definitely dive the price and block any single exchange.