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Bidders run up bitcoin price in government auction

(Dado Ruvic/Reuters)
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Bidders outdid one another in a scramble to claim a fraction of a bitcoin, sending the price well above market rates in a first-of-its kind auction at the General Services Administration.

Officials at the federal agency placed a 0.7501 share of a bitcoin on the auction block for a two-day bidding event that ended Wednesday, marking the first time the GSA — which typically offers surplus government vehicles and office supplies — has allowed the public to place bids on cryptocurrency.

At the close of the auction, the highest bidder grabbed the bitcoin share at a price of $53,104. That’s about 21 percent higher than the market value, meaning the government auction generated a significant premium.

He just spent $69 million on a digital piece of art. It’s not his first Beeple.

“Auctioning off this share of cryptocurrency broke new ground for our GSA Auctions platform, and we’re extremely pleased by the enthusiasm we’ve seen from our bidders,” said Acting Regional Administrator Kevin Kerns with GSA’s Southeast Sunbelt Region, in a statement to The Washington Post.

Bidders one-upped themselves throughout the auction. The GSA’s bidding history shows that the auction participants — who are not identified — raised the top bid by more than $8,000 since Monday, in increments ranging from $5 to $2900. The financial battle to win the bitcoin slice outpaced the broader market, where the price of bitcoin has risen slightly since the start of the week.

The auction comes amid an extraordinary rally in cryptocurrency markets, and as bitcoin recently surpassed $60,000 for the first time. Bitcoin’s value has roughly doubled since the start of the year, riding a staggering comeback from the lows of last spring, when investors rushed to sell during the early weeks of the coronavirus pandemic.

Experts say the recent bitcoin surge is driven in part by investors seeking protection from inflation and as an alternative store of value. “People buy it outright as an investment, but increasingly it’s also being bought in order to diversify traditional portfolios,” said Shane Edwards, global head of investment products at Diginex, a digital asset financial services company.

Although the cryptocurrency bidding event was a first for the GSA, the U.S. Marshals Service has been auctioning bitcoin since 2014, following the FBI’s crackdown on the digital black market Silk Road, seizing more than 170,000 bitcoin. The law enforcement agency has administrated nine bitcoin auctions.

The GSA declined to share where its bitcoin fraction came from, citing privacy concerns. Items up for GSA auctions can come from a variety of sources, the agency said, including seized property.

The winner of the auction must send the full payment by Friday, through a wire transfer, and will receive the bitcoin through a digital wallet.