More Than a Quarter of All Bitcoin in Circulation Is Controlled by Few Investors

The research was led by two finance professors Antoinette Schoar from MIT Sloan School of Management and Igor Makarov from London School of Economics. They were able to study and analyze all bitcoin data since its inception, 13 years ago.

This research was possible because Bitcoin uses blockchain technology, which registers every transaction and all the data that happens on the bitcoin network are on a public ledger, so anyone can access and analyze this “on-chain” data.

There is 19 million bitcoin in circulation and the study showed that the first 10,000 wealthiest bitcoin wallets hold 5 million bitcoin ($230 billion equivalent at the time of this writing), and with an estimation of 114 million wallets around the world holding bitcoin according to Crypto.com, that means that 0.01% of bitcoin holders control 27% of all the bitcoin in circulation.

If we compare the wealth in the U.S., according to the Federal Reserve the top 1% of households own almost a third of all wealth.

Is Bitcoin decentralized as it was meant to be?

One of Bitcoin’s main purposes was to be a decentralized system, however, “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,” Antoinette Schoar commented.

In the study, the professors analyzed two aspects when considering Bitcoin as centralized. First, that the bitcoin network is more vulnerable, and second, that the benefits of the global adoption and higher prices go to a small group of people.

When the researchers analyzed the volume, they said that the “real volume” was only 10% and were transactions between exchanges and trading desks, and the other 90% of the volume in part was people distributing bitcoin in different wallets to confuse their identity.

What about Bitcoin miners?

One thing to study is that in order to get bitcoin instead of an exchange, mining equipment has been more difficult to access because not everyone can afford to pay these high prices, and not only the equipment, but also the electrical infrastructure you need to have.

According to a study of the University of Cambridge’s Centre for Alternative Finance, because China prohibited bitcoin mining earlier this year, it went from having almost two-thirds of all the Bitcoin mining hashrate of all the network in April to almost not having any hashrate in July 2021.

The Chinese bitcoin miners relocated their mining equipment especially to the U.S., and also other countries like Kazakhstan and Canada.

90% (19 million) of all bitcoin is already mined, and there are only 2 million bitcoins to be mined until 2140.

It appears that centralization is a term that nobody wants to hear near the bitcoin ecosystem but the data appears to be that way, we can expect that from today until the last bitcoin is mined, adoption will continue to rise, entering more investors in the Bitcoin world and expect at least that the 10% of the bitcoin is yet still to mined, to be distributed in a more decentralized way than today.