Why Bitcoin price jumped after the SR2 seizure

What happened

As we all know SR 2 has been seized on Thursday November 6th. The FBI conducted multiple dark net market seizures as part of their operation “Onymous”  which was a global law enforement operation which involved the cooperation of multiple law enforcement agencies across the globe. As a result, Silk Road 2 along a few other marketplaces such as Cloud 9 and Hydra. If you want to read more about the siezures please visit this reddit thread.

This article is not going to be focused on the whys and hows of law enforcement’s tactics to shut down the markets, it will be focused on the seizures’ affect on the bitcoin economy.

To start off lets recap, SR2, Cloud 9 and Hydra were all sized approximately at 15 UTC on 11/6/14 Below is a chart taken from bitocinwisdom btc-e starting from 11/6 up untill 11/8:

11/6 btc-e


There are a couple things to notice, firstly we see increased trading volume and a pretty dramatic upwards spike. Some may think that bitcoin’s price is doing well because another marketplace has been taken off the market and bitcoin is on it’s road to a squeaky clean currency. However, my theory as to why bitcoin’s price increased is as follows:

Firstly, since SR2 has been siezed and many mother markets were taken down either by the government or for their fear of safety, it caused a shortage of coins. When that many markets are siezed many user’s loose their coins. As a result there is a slight increase in demand for bitcoins which gets accompanied by a price increase. Anybody can analyze a graph and explain/ theorize about the outcomes, however the real question is how will bitcoin act in the future?

Lets gather up some more data, The first Silk Road siezure occured on Tuesday October 1st of 2013. Lets take a look at a 1 week chart starting from October 1st 2013, in this example I will once again be using btc-e and bitcoinwisom:



This chart shows that the seizure of SR1 was the spark that ignited the bitcoin bubble of 2013, which took Bitcoin to the moon. Will history repeat itself and will the seizure of SR2 bring the attention thats needed to bitcoin to take it to the next bubble and reach a high of $10,000. Probably not, however it should come of no surprise if Bitcoin’s value continues to increase because of the demand that occured after the closing of the few dark net markets. Because this time SR2 wasn’t the first/only marketplace available we will not see as high of an effect as the one that occurred in 2013.

It has been a bearish market the past couple months, are we seeing Bitcoin bottom out and slowly start to change trends? Possibly, maybe the siezure of SR2 will show its effect by changing the bitcoin market from a bearish to a bullish one, maybe it won’t cause a massive bubble but if history repeats itself (which it usually does) then we should see much more positive power going to Bitcoin.

As a disclaimer any trading advice given on this site is purely speculative/theoretical and we are not responsible for any lost funds as a result of following this advice. If you have any theories/comments about what you think will happen to bitcoin’s price feel free to post them below.

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