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> So if the bitcoins are seized by some government entity....wouldn't that make the total value of bitcoin go up? Supply and demand and all that...

You are only considering the supply side and assuming that the government seizing bitcoins from one of the major exchanges (and, subsequently, collapsing the exchange) doesn't impact the perceived viability of the bitcoin ecosystem (since, presumably, the same thing could happen elsewhere) and reduce the demand for bitcoins as well as the supply.

Also, it further assumes, on the supply side, that the government simply throws the coins in, effectively, a digital landfill -- otherwise, the fact that they were forcibly transferred from the exchange to the government doesn't actually have any effect on supply.




That's something I've always wondered about. When the DEA or seizes, say, a million dollars in cash from a drug dealer...where does it go? I assume the bulk of it goes into the pocket of someone. But where does the officially seized money go? Do they destroy it? Similarly, what would they do with 25,000 BTC? And could they even document it properly?




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