Citibank has once again weighed in on bitcoin prices. This time, CoinDesk reports that Citibank’s global head of FX strategy, Steven Englander, said in an internal note that bids in the upcoming US Marshals Service (USMS) auction are likely to be discounted.
The USMS is to auction 50,000 of accused Silk Road operator Ross Ulbricht’s 144,000 bitcoins tomorrow, December 4th.
Englander has been generally bearish on bitcoin prices in 2014. In August, he predicted that they will face further downward pressure for several reasons such as low consumer demand and miner costs. Prices have indeed declined since then.
Prior to the first USMS auction, he predicted that an additional supply of ~30,000 bitcoins coming into the market will likely drive prices downward. After a brief spike immediately prior to the auction, prices preserved the bulk of their gains during most of July.
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This time, Englander did not cite excessive supply as a cause for his prediction. Rather, the recent downward trajectory in bitcoin prices may motivate bidders to “low ball their bids relative to the current market price.” Bidders may also be looking for “getting a post-Black Friday bargain.”
Furthermore, he argued that barriers to entry such as the deposit requirements may turn buyers away (although this did not seem to be the case last time).
The winner in the first auction, venture capitalist Tim Draper, did not disclose the price he paid, only saying, “I paid more than the other people in the auction.” However, it is likely that he paid more than the market rate in the high-profile event. This time around, there is less hype surrounding the auction and perhaps bidders will not be as willing to pay a premium.
However, the laws of supply and demand dictate that bidders are unlikely to bid significantly less than the going market rate, either. Otherwise, the arbitrage opportunity is simply too excessive.