Crypto Holdings Are Anything But Decentralized
One of the biggest draws of crypto is decentralization and putting power to many as opposed to just a select few. The main issue most people have with our fiat systems is so much money and power in to few hands. The "one percent" everyone talks about in traditional money. However, is it that much different in the crypto economy.
Who Holds The Coins?
Here's the thing about crypto most people and I myself sometimes forget. Those that were in early, like really early in the bitcoin under $10 days. Where mining a block got you a crap ton of coins and you could also buy them on the cheap, those are many of the people that hold a lot of coins.
Then you also have the ICO folks that took BTC as payment for their coin and thus accumulated a large position.
So basically, we have big players. We have the 1% in crypto.
According to bitinfocharts 58% of all bitcoin is held by just the top 10,000 wallets. There are roughly 22 million bitcoin wallets!
10,000 wallets is less than one half percent of all the wallets and they control a majority of bitcoin. If we push out to the top 1% of all wallets the overall number increases into the high 60 percent area of all bitcoin in circulation.
Market Movers
Basically what we have is a scenario where the price of bitcoin can be pushed around by a handful of big players.
The irony is this is exactly what everyone wanted to get away from with wall street. The big financial firms dictating markets and manipulating price action. It is why the traditional markets have all these rules and regulations now.
Can I Be Bullish With This?
That is the dilemma here, knowing that there are about 10,000 accounts (who knows if it is actually 10,000 separate people) that can tank the price of Bitcoin if they need to liquidate a large amount for whatever reason.
The investor in me struggles to be bullish in the near term with that scenario and time is the only thing that will remedy this. It will happen organically as the big players cash out bitcoin for one reason or another and those coins go into many hands.
However, in my humble opinion this is something that will take time. It is the same situation in most other coins, especially ethereum as alot of big ICOs accepted ETH as payment.
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Disclaimer: All info in this post is my opinion and for informational purposes only
Free e-book: ScaredyCatGuide to Knowing What the Heck Bitcoin Is
Disclaimer: All info in this post is my opinion and for informational purposes only
well structured article keep up the great work
Thanks for sharing. This is the reality cryptocurrency faces. Most top market cap coins have holders who amass the majority of the coin. Never is a good thing but that is apart of the game. Ironically everything was shared equally it would likely worth a lot less. not sure why that is the case but it just is.
Yup, agreed. In the end human nature is driven by fear and greed so I'm not sure if there is a technology that can fix that.
I think the data on wallets could be misrepresenting the reality of ownership due to the exchanges that hold assets for clients. This could lead to an apparent centralization. Its also a concern as one large hack could lead to events that impact prices.
Yeah, even in that instance the whole point of crypto is being muted as we are supposed to be "anti-centralization" so yeah, good times lol.
I can't even tell you how many different wallet addresses I own- I found one from 2014 that I completely forgot about and went to check it and I had like $1 in BTC on there from a faucet. Would have been cool to discover like half a Bitcoin on there but then I would have had to sync 4 years of transactions :-D!
Damn, that would have been a good problem to have though!
Great article and perspective...I wonder what % of bitcoin is own by the exchanges.
For BTC sure, but don't forget that BTC is only a microcosm of the bigger picture. Yes, it does enjoy massive market share for now, but there are a hell of a lot of other cryptos out there that are much more evenly distributed.
Think about it: would you like to put $1000 into BTC, knowing what you do about it, or $1000 into a promising new ICO (a proper one, not one of these fly-by-night rubbish ones). For now a lot of people will still choose BTC, but what if the BTC whales do start playing too many games with the price? That would shift the BTC holders and potential holders away from BTC and towards the rest.
I think BTC will always be there, mainly as a store of value, but that it will continue to lose market share (in the long-term) to altcoins. And if you shop carefully right now already, you can pick up some great deals in very low market cap altcoin country!
Yes, many alts are distributed much more evenly as the irony is that those projects are large holders in coins like ETH since that is what they accepted as payment. Even more the reason to have some alts in one's portfolio.
I wonder how much (and I really have no clue what the answer is here) of that collected ETH from ICOs is kept by the ICOs, and how much they change into fiat to build their company/launch the coin etc
This happens at all times but the system is still decentralized. It will take time but each year we become safer and less risk averse to these whales as the rest of the world adopts bitcoin.
To be precise, it's multicentralised
Yes, exactly!