Bitcoin Whale Wealth Control Highlights Currency Centralization: Report

A tiny minority of entities control the lion’s share of the world’s most popular digital asset. The top 1% of Bitcoin holders control more wealth than the majority of affluent households in the United States, according to new research.

An even more shocking statistic is that just 0.01% of Bitcoin holders control 27% of the currency in circulation. A Dec. 20 report by the Wall Street Journal has delved into the dynamics of Bitcoin supply and where it is concentrated.

A study by the National Bureau of Economic Research revealed that the top 10,000 BTC addresses hold 5 million coins, currently worth around $235 billion. This is about the same as the market capitalization of Pepsico, the world’s 48^th largest company.

Bitcoin Whales Wealth Growing

The research added that with an estimated 114 million people holding BTC globally, this tiny fraction controls 27% of the 19 million coins in circulation. It did not specify whether these addresses belonged to exchanges or custodians, however.

The Bitinfocharts BTC rich list reports that the Binance cold wallets are the top 2 addresses holding a combined 433,490 BTC worth around $20 billion.

The figures reflect the current status of wealth disparity in the United States where the top 1% of households hold about a third of all wealth, according to the Federal Reserve.

The study was conducted by finance professors Antoinette Schoar at MIT Sloan School of Management and Igor Makarov at the London School of Economics. According to the WSJ, it mapped and analyzed every transaction in Bitcoin’s history.

The paper argues that there are two ramifications of this centralization. Firstly, the entire network is more susceptible to systemic risk, and secondly, the wealth from this new financial freedom network is being concentrated to a very small number of entities. Antoinette Schoar commented:

“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,”

The WSJ went on to say that Bitcoin mining is also centralized as it is controlled by a small number of companies and pools and cannot be practically attempted by individuals.

BTC Price Outlook

Bitcoin prices have made a small bounce over the past 24 hours and were trading at $47,107 at the time of writing according to CoinGecko.

The asset is currently down trending, having lost 6.7% over the past fortnight. It has now corrected 31.7% from its Nov. 10 all-time high, but this is not the largest correction of the year, and it is still too early to call it a bear market.