According to Business Insider, analysts at the Switzerland-based bank Credit Suisse recently explored the bitcoin blockchain and revealed their findings in a note sent out to clients. Per the financial institution’s findings, 97% of all bitcoins are concentrated in only 4% of all addresses.
The report implies wealth in the cryptocurrency ecosystem is heavily concentrated, as these addresses are seemingly “hodling” to their coins for dear life. Credit Suisse said:
“The concentration of wealth at a small group of addresses – be it individuals or exchanges –means that a few key players in the game can have a massive influence on the bitcoin market.”
In its report, Business Insider compared the bitcoin network’s concentration to that of the world’s wealth. According to an analysis by Credit Suisse in November, the wealthiest 1% of the world’s population own about half of the world’s wealth.
Given bitcoin’s limited supply, the fact that some addresses are holding on to their large amount of coins is only beneficial to all other bitcoin users, as it makes bitcoins in circulation even scarcer and thus more valuable. The bank noted that the wealth concentration points to a bitcoin use-case as a store of value. The note reads:
“Significant proportions of bitcoin and other cryptocurrencies are apparently being held like precious assets, thereby severely restricting the flow and availability of the digital currencies.”
Credit Suisse’s analysis seemingly fails to take into account the concentration of bitcoin on an exchange’s cold wallet, a necessity for security reasons. When South Korean cryptocurrency exchange Youbit was hacked, for example, it only lost funds stored in its hot wallet, and kept those in its cold wallet.
Credit Suisse: Some of the addresses that keep hodling
Taking into account an increasing use of bitcoin exchanges, seen by the overwhelming demand that even forced some exchanges to halt new user registrations, a larger number of bitcoins is bound to be stored in them. Bitfinex’s cold wallet, for example, is believed to have about 1% of all bitcoins mined so far. Taking into account that the biggest exchange Binance recently added 240,000 new users in one day, we can see why a small number of wallets have most of the bitcoins.
Another large bitcoin holder is the U.S. government. When Silk Road was taken down, the government seized bitcoins belonging to Dread Pirate Roberts (DPR), the admin operating the now-defunct marketplace, believed to be A Ross Ulbricht. The FBI’s address containing DPR’s funds currently has over 144,000 BTC in it. Another address belonging to the FBI contains funds seized from the Silk Road, another 29,000 BTC.
Then, we the pseudonymous bitcoin creator Satoshi Nakamoto. He is believed to have a whopping 980,000 BTC amassed from mining the flagship cryptocurrency in its early days. Satoshi’s stash has never been touched.