Bitcoin wallets linked to Silk Road move funds after years of dormancy

Two Bitcoin wallets linked by analysts to Silk Road-era activity moved a substantial amount of cryptocurrency in May, with follow-up activity on Dec. 10 adding to a pattern of dormant supply movements, according to blockchain tracking data.

Summary

• Two long-dormant Bitcoin wallets tied by analysts to Silk Road–era activity moved more than 3,400 BTC in May, with additional consolidation on Dec. 10.
• Forensic data shows the funds—sourced from wallets dormant since 2013—were redirected to new SegWit P2WPKH addresses, a structure analysts say is consistent with re-keying instead of preparation for sale.
• Market observers note that U.S. Bitcoin ETFs absorb substantial weekly liquidity.

The Digital Watch Observatory reported that May’s transactions totaled approximately 3,421 bitcoins. The sequence included a 2,343-bitcoin transfer at block 895,421, which redirected output to a new SegWit address, according to the observatory’s data.

On-chain forensic analysis shows 31 consolidated outputs moved to a new P2WPKH destination, a model analysts said is more consistent with internal custody management than with an immediate deposit to an exchange.

Blockchain trackers reported on Dec. 10 a further consolidation of funds from over 300 wallets labeled as connected to Silk Road, the defunct darknet marketplace.

The distinction between consolidation and transfer to labeled exchanges, such as Coinbase Prime, affects trader responses, according to market observers. Flows to Coinbase Prime or other prime-broker venues are treated as potential short-term supply, and U.S. government transfers to Coinbase Prime in August 2024 and December 2024 have historically coincided with temporary risk-off positioning, market data show.

The wallets used in May’s transactions were created in July 2013 and had been dormant for approximately 11 to 12 years before the spending, according to blockchain records.

The U.S. Marshals Service in 2014 auctioned 29,656 bitcoins seized from Silk Road, which venture capitalist Tim Draper purchased. Subsequent seizures included roughly 69,370 bitcoins tied to an individual identified in court documents as “Individual X” in 2020 and about 50,676 bitcoins from James Zhong in 2022.

Analysts tracking the transactions said consolidation to new P2WPKH addresses, as observed in May, suggests internal re-keying rather than immediate sale. Market observers have outlined probability scenarios ranging from 40 to 55 percent for internal custody management, 25 to 35 percent for over-the-counter distribution through prime brokers, and 10 to 20 percent for a securities-driven de-risking scenario involving government transfers of 10,000 to 20,000 bitcoins coinciding with weak exchange-traded fund flows.

Market participants monitor tagged receipts, particularly at Coinbase Prime, following any new Silk Road-related spending, according to trading desk sources. U.S. Bitcoin spot ETFs regularly absorb large amounts of liquidity each week, suggesting Silk Road-related sales are unlikely to materially affect prices without an additional catalyst, analysts said.

The May and Dec. 10 activity patterns indicate consolidation rather than distribution until exchange labels appear, according to blockchain forensic firms.