The US Marshals Service (USMS) is set to auction off 50,000 BTC seized from alleged Silk Road mastermind Ross Ulbricht this Thursday, and if a new research note from financial giant Citi proves accurate, participants may be able to obtain bitcoins at a steep discount.

Penned by Citi's global head of FX strategy Steven Englander, the internal note argues that bitcoin's recent decline in value against the dollar will cause participants to "lowball their bids relative to the current market price".

Englander asserted that the prospect of future bitcoin auctions is likely to influence bidder behavior, as the USMS has indicated it will soon seek to sell off the roughly 94,000 BTC still in its possession in the coming months.

Englander writes:

The first USMS auction, held this June, ultimately saw roughly 30,000 BTC confiscated from the black market website Silk Road sold to Draper Fisher Jurvetson partner Tim Draper.

Englander suggested that rumors that Draper bid above market price, before bitcoin's decline in value from roughly $640 at the time of sale to $381, would also influence buyer behavior.

In addition to these factors, Englander stated his belief that few buyers in any USMS auction bid above market price.

Englander went as far as to suggest that this would not be a wise investment strategy for participants, writing that he doesn't see an advantage "given bitcoin's fungibility and the excess supply that has driven down the price over the last year".

"My expectation is that most bids will be aggressively to the downside in the hope of getting a post-Black Friday bargain," Englander said. "Bids for a block or two may be at a moderate discount to the market price, but I would expect the bid for the biggest number of blocks to be at a hefty discount."

Still, Englander said this outcome is likely to be influenced by whether participants desire to buy and hold the currency, a strategy evoked by Draper, or simply buy to sell the bitcoins on the open market.

Englander went on to state that, even in spite of the opportunity to obtain bitcoins at a discount, the requirements of the US Marshals auction itself may turn buyers away.

For example, Englander indicated that investors who don't want to meet the auction's know-your-customer (KYC) requirements or put up the $100,000–$150,000 necessary to participate may be dissuaded from participation.

As a result of these factors, Englander concluded:

The responses echo beliefs voiced by prospective bidders as well, some of whom have stated their belief that overall interest in the second auction is not as strong as the first.

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