Top 0.01% of Bitcoin holders control nearly a THIRD of the digital currency worth $232 billion in a dangerous level of concentration, study finds
- Study mapped every transaction over Bitcoin’s 13-year history
- Found wealth concentration is even higher for the crypto than in US economy
- Just 0.01% of Bitcoin holders account for 27% of all holdings
- Concludes Bitcoin eco-system is still dominated by concentrated players
Ownership of Bitcoin is highly concentrated, with just 0.01 percent of all holders controlling 27 percent of the cryptocurrency, a new study has found.
The top 10,000 Bitcoin accounts hold 5 million Bitcoins, worth about $232 billion at current prices, according to the recent study by the National Bureau of Economic Research.
This level of concentration brings ‘systemic risk’ in part because a small number of people could trigger a price collapse if they sold their holdings at once.
‘Despite having been around for 14 years and the hype it has ratcheted up, it’s still the case that it’s a very concentrated ecosystem,’ study co-author Antoinette Schoar at MIT Sloan School of Management told the Wall Street Journal.
The study was conducted by mapping every transaction in Bitcoin history for the first time ever, and found that wealth concentration in the cryptocurrency is greater than in the US economy at large.
The top 10,000 Bitcoin accounts hold 5 million Bitcoins, worth about $232 billion at current prices and 27% of the total available, a new study found
In the US, where wealth inequality has been rapidly increasing, the top 1 percent of households hold about a third of all wealth, according to the Federal Reserve.
The study by Schoar and Igor Makarov at the London School of Economics warned that despite its promise of decentralization, Bitcoin is becoming highly concentrated in several important ways.
An estimated 114 million individuals hold Bitcoin worldwide, but nearly a third of the value is concentrated in 0.01 percent of accounts, the study found.
They authors found that major Bitcoin exchanges explain 75 percent of real Bitcoin transaction volume, and that Bitcoin mining capacity is ‘highly concentrated.’
Bitcoin has surged since March 2020 when it was trading at around $5,000, reaching a peak of $68,990.90 last month. It has since dropped off its record highs
When Bitcoin first launched, anyone could create a node on their computer to process transactions, also known as mining, but the endeavor has now become highly specialized, requiring vase computing power.
‘Our results suggest that despite the significant attention that Bitcoin has received over the last few years, the Bitcoin eco-system is still dominated by large and concentrated players, be it large miners, Bitcoin holders or exchanges,’ the authors wrote.
‘This inherent concentration makes Bitcoin susceptible to systemic risk and also implies that the majority of the gains from further adoption are likely to fall disproportionately to a small set of participants.’
The total number of Bitcoins that will ever be created is capped algorithmically at 21 million.
An estimated 114 million individuals hold Bitcoin worldwide, but nearly a third of the value is concentrated in 0.01 percent of accounts, the study found
There are currently around 19 million Bitcoins in circulation, and the rate of new coin creation slows as time goes on.
More than 1 million Bitcoins, worth some $50 billion, are owned by the creator of Bitcoin, known as Satoshi Nakamoto, whose true identity is unknown, and whose accounts have sat untouched for more than a decade.
Bitcoin has surged since March 2020 when it was trading at around $5,000, reaching a peak of $68,990.90 last month. It has since dropped off its record highs.
On Monday cryptocurrencies Bitcoin and Ether edged lower, with Bitcoin down 1.5 percent at $46,147.78 and Ether down 2.2 percent at $3,819.51.
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