Bitcoin is not highly concentrated, on-chain analyst, Willy Woo, has said. Rather, it continues to improve its distribution over time. Woo’s assertion comes in a series of tweets seeking to break down Bitcoin’s distribution based on data. It is to refute claims that the cryptocurrency is not being widely adopted by institutions and individuals as it is being made to seem.
When its price rose in November, Bloomberg reported that only a few large holders a.k.a whales continue to own most Bitcoin. The report claimed that 2% of the anonymous ownership accounts control 95% of the digital asset citing a study by Flipside Crypto. The report theorizes that whales’ impact on the highly illiquid market can leave small investors open to wild price swings.
Yet, taking his data from Glassnode, Woo submits that whales and custody providers only control about 21% of Bitcoin distribution while 13% is with cryptocurrency exchanges and its over 130 million registered users.
He adds that 10% of Bitcoin (or 1.8 million coins) is with miners (including Satoshi’s coins) while 56% are with non-whale holders to better suggest that its distribution continues to improve over time as the coins on exchanges are increasing.
I want to put to bed this BS article propagated by Bloomberg saying BTC is highly concentrated.
— Willy Woo (@woonomic) January 9, 2021
Why Bitcoin concentration matters
The need to understand the concentration of the top cryptocurrency is crucial across various regions as it worries some in the space especially as its volatility is concerned.
Bitcoin surged through the $40,000 mark for the first time last week – after breaking many price records – to double in price in five weeks. It reached an all-time-high of $41,900 on January 8 before shedding off close to $10,000. It has since tumbled back to around $34,000 as at this writing — or around 15% lower than its value over the weekend.
Many referenced the strengthened involvement of institutional investors in the price build-up as Bitcoin’s status as an asset class has become harder to dispute. From Grayscale to UK-based asset manager Ruffer, institutional investors’ interest in Bitcoin has grown as it is now recognised by many regulators, has much vested capital in its system to go to zero and has defied scrutiny.
Philip Gradwell at Chainalysis notes that North American institutional investors top the list with exchanges in North America getting net inflows of Bitcoin from other areas worldwide including China where strict scrutiny has reportedly tipped Chinese cryptocurrency asset managers to look to places like Hong Kong and Singapore to expand their businesses.
Case for long-term Bitcoin bullishness
When there is a price drop, Bitcoin’s being always a victim of thin liquidity – like in the Flipside Crypto study – is often mentioned. With Woo maintaining that 56% are holders of less than 1000 Bitcoin whereas a whale would hold more than 1000, his latest breakdown seeks to water down speculation that whales are responsible for the recent price dip to enable them to buy more Bitcoin for less.
Meanwhile, Woo’s assessment, coupled with about 3.8 million coins considered lost as per a Chainanalysis’ study, the case for a long-term bullishness around Bitcoin is somewhat strengthened.
Jehan Chu, founder of cryptocurrency-focused venture capital and trading firm Kenetic Capital, told CNBC that the short term correction is “both natural and needed” as well as a great entry point for long-term investors “as we quickly reach $50k this quarter and $100k by year’s end.” His words tow the line of the view shared by Social Capital’s Chamath Palihapitiya last week that Bitcoin could go above $100,000.