The Secret of the $1M Bitcoin Round Trip

In March, someone transferred $1 million worth of bitcoins through a major crypto custodian. Three weeks later, almost exactly the same amount returned. Incredibly, less than two months later, Bitcoin was deliberately destroyed.

The wallet was inactive for about 12 years and suddenly it came back. Bitcoin academic Bennett noted that it sent 20.00010537 BTC to “a custodian of some sort” before getting it back (minus $3 or so).

“The whole balance looks like an exchange hot wallet, and almost exactly the same amount comes back after three weeks. Seven weeks after that, it burns.”

The mysterious BTC transaction is part of a wider mystery surrounding the 107 BTC burned in May, worth about $8.5 million at the time.

New blockchain analysis shows that the five wallets that ultimately destroyed their bitcoins appear to be controlled by the same person. It is likely an early Bitcoin holder who had funds in the collapsed Mount Gox exchange.

But why on earth would anyone intentionally destroy millions of dollars worth of bitcoins?

Behind this, the wallet of BTC has been burned

The five addresses that ultimately sent their bitcoins to an unspendable address show “strong indicators of common ownership,” according to Chainalysis.

How to Destroy Bitcoins Source: Bennett.org

All five wallets were initially funded on the same day in April 2014, and each subsequently sent roughly the same dollar-equivalent of BTC to the same deposit address on a large centralized exchange.

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The addresses also appear to be operated on a rotating basis: one will send bitcoins to the exchange until its activity ceases, then another will receive with transactions of “similar cadence and value.”

Most of the funds, Chainanalysis says, can be traced back to Mount Gox, “the owner of which is suggested to be an early adopter of Bitcoin.”

This does not mean that the coins were withdrawn directly from Mount Gox, as the exchange ceased trading in February 2014, and the five wallets were funded in April. Bennett said:

“It is entirely possible that the owner of these coins was one of the lucky ones who managed to get their coins out of the exchange before it collapsed.”

The parent himself remains unidentified. Chainanalysis confirms it is a large centralized exchange but says it does not publicly disclose the names of the services it identifies.

Bennett’s analysis suggests that the address behaves like a static customer deposit address to a large parent.

This is because the address does not maintain a balance, and deposits are transferred to transactions containing dozens of other inputs before being consolidated into a public wallet.

Once a bitcoin enters the custodian system, the public blockchain can no longer tell us what happened to that coin. And it makes the previous activity of the wallet more attractive.

$10,400 clue

One of five addresses sent 19.6 BTC in 60 transactions to Custodian between 2022 and 2024.

Bitcoin amounts varied widely, from about 0.15 BTC to 0.62 BTC. But when measured in dollars, the transactions reveal remarkable similarities.

This address sent 19.6 BTC in 60 transactions to the same custodian. Source: Mempool.space

Despite Bitcoin’s price quadrupling during this period, 58 of the 60 transfers were within 10% of about $10,400 at the time of dispatch.

So, while the owner wasn’t sending the same amount of BTC over and over again, they were sending roughly the same dollar amount over and over again. Bennett said:

“It suggests to me a planned liquidation strategy.”

There is no way to prove this theory from the blockchain, since BTC was mixed with a large number of other coins once it reached the custodian, and the data does not show whether the bitcoins were sold, held or transferred elsewhere.

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Interestingly, “while the size of the payment was constant,” Bennett says, “the frequency was not—these $10k transfers came in clusters,” which may be more consistent with sending fixed-dollar amounts when needed rather than following an automated schedule.

$1 million round trip

While the $10,400 transactions provide a possible explanation for the wallet owner’s prior relationship with the custodian, they do not help explain the $1 million round trip that occurred in March.

After sitting untouched for almost 12 years, suddenly the wallet to move Its full balance returned 20.00010537 BTC and 20.00006037 BTC, a difference of only 4,500 satoshis, or about $3.

This weighs against the idea that the owner was simply trading bitcoins, since whatever happened inside the custodian, almost exactly the same amount came back.

This address sent 20 BTC and received 20 BTC back. Source: Mempool.space

The returned bitcoins were split into three transactions of 7 BTC, 7 BTC and 6.00006037 BTC, sent on three consecutive days.

Bennett said the round numbers are consistent with daily withdrawal limits imposed by the custodian. Importantly, Bitcoin didn’t just end up in another wallet; It is returned to the same address it was sent to.

Transaction history also indicates that the same key holder controlled the coins before and after the round trip, Bennett said: a private key is needed to spend bitcoins in March, and the same key is needed again to burn it in May.

This makes it particularly difficult to interpret as a conventional barter transaction.

So why did they do it?

There are several possibilities, but none fit all the evidence. The liquidation theory gives some idea of ​​the previous transactions, but it does not explain why the owner would send roughly $1 million through the same infrastructure in March and then recover virtually all of it.

Perhaps the owner was testing an old wallet or custodial system after it had been dormant for 12 years, moved the coins through a key custodian, and successfully retrieved them to show that an old key and custodial setup still worked. But then, why destroy bitcoin later?

Tax or compliance reasons might explain why someone transferred an old stash through a major parent, but then, there’s no evidence linking the transaction to a specific tax or regulatory event.

There is also a privacy explanation. Sending bitcoins through a custodian that sweeps deposits into a public wallet makes subsequent movements of those coins harder to track onchain. This is certainly admirable but still gives no clue to their ultimate destruction.

Perhaps the Bitcoin Burn itself was intended as some statement. Yet outside of a few blockchain sleuths, the action went largely unnoticed.

Burning bitcoins is irreversible, so the person who controls the private keys chooses to send the coins somewhere they can never be spent again, rather than simply leaving them untouched. Bennett said:

“There’s also the possibility that a very wealthy person without heirs decided to permanently burn their coins (thereby reducing the total supply of bitcoins to the public) rather than destroy their keys.”

For now, even the best companies are at a loss for blockchain analytics. Chainlysis recognizes:

“We don’t have a clear explanation why the owner would remove a long-dormant site through a custodian, recover roughly the same amount, and then deliberately burn it.”

While blockchain can provide an unusually detailed record of what happened, it cannot tell us why. For now, at least, that remains the million dollar question.

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