Setting a Precedent

Recently, the large international accounting firm Ernst & Young oversaw the first auction of digital currency in Australia. After reportedly arresting a man for violating Australian drug laws over the Internet, law enforcement agents in Victoria seized a significant quantity of Bitcoin as the proceeds of crime. Each unit of Bitcoin represents digital currency. Some 24,518 Bitcoins went to auction as a result of the bust.

The authorities in Australia anticipated receiving between $16 million and $19 million for the Bitcoins during the two-day auction in late June, 2016. This expected sales price would represent the equivalent of nearly $22 million in Australian dollars. As it happened, prices fluctuated close to the time of the event.

A Digital Bargain For The Affluent

Prospective bidder paid deposits of a quarter of a million dollars to participate in the auction. The comparatively high deposit figure meant that only institutions and financially successful individuals could participate in the first-of-its-kind Australian auction that ended on June 21st or June 22nd (depending on your global location).

The auctioneers offered the digital currency as one lot of 2,518 Bitcoins and 11 individual lots of 2000 Bitcoins.Although bidders enjoyed wide latitude in the prices they bid, authorities estimated each lot would command a price of over $1 million in Australian currency.

Some Important Price Considerations

In advance of the novel auction, many potential bidders opted not to divulge whether or not they would participate in the event. The Australian bitcoin auction happened to close proximate to the time that the value of Bitcoin fluctuated. Unlike conventional securities, due to the international nature of digital currency, it does not enjoy the same regulatory protections that regulators in some nations furnish for most types of stocks and bonds.

Although the Bitcoins offered at the auction went to the block at a time when many people predicted they would likely appreciate by as much as 2% for over-the-counter buyers, for three consecutive days ending near the date of the auction Bitcoin values in fact fell sharply. On the night of June 22nd, 2016, Bitcoin reached a three-day low of $550 in some markets, down from a high of $680 according to Andrew Quentson. He wrote that price fluctuations of that type have sometimes accompanied auctions of Bitcoins in the past. Ernst & Young described the Australian auction as only the second in the history of the digital currency, however.

Forces Impacting Bitcoin Prices

The value of Bitcoins fluctuated significantly during June, and some analysts cited two main sources for the high variablity: “halving” and the Brexit referendum. During the planned halving process, the quantity of newly-minted Bitcoins will decrease by 50%. Some sources attributed the significant increase in Bitcoin values during early June to the looming impact of this systemic change, which many Bitcoin owners had long awaited.

Additionally, the vote in the United Kingdom to approve the Brexit referendum may have exerted a pronounced impact on the Bitcoin marketplace. Surprisingly perhaps, a vote by Britain to leave the European Union struck some analysts as likely to encourage a strengthening of both gold and Bitcoin. If so, the decline in Bitcoin around the time of the auction might have forecast a different result in the election. Voters in the UK ultimately chose to withdraw from the EU, which should have sent Bitcoin values higher.