Bitcoin has had a tremendous few last months, hitting a new all-time high price fuelled mainly by institutional investors. As more investors come on board, only a few addresses control a large percentage of the current 18.59 million Bitcoin supply.
Data presented by Buy Shares indicates that as of January 6, a total of 2,225 Bitcoin addresses control 5,447,017 BTC, which is 29.3% of the current BTC in supply. A total of 136,356 Bitcoin addresses contain 4,407,061 BTC, which is 23.71% of the asset’s supply as of January 6th, 2021.
On the other, 16,740,454 BTC addresses control the least amount of Bitcoin at 3,386. Only one address holds 141,452 BTC, which is 0.76% of BTC in supply.
Institutional investors constituting Bitcoin’s rich list
It is important to state that the number of Bitcoin addresses does not necessarily mean that 2,225 people control 5,447,017 BTC since one individual or institution can own multiple Bitcoin addresses. On the other hand, a big chunk of the Bitcoin stored in the most addresses is owned by numerous people holding funds on exchanges. Due to the nature of blockchain, crypto addresses are difficult to track back to a real owner’s identity. Anyone can create a Bitcoin address without using personal information.
The few addresses accounting for almost 30% of Bitcoin possibly reflects the increasing interest from institutional investors and high-net-worth investors. Activity from institutions soared in 2020, especially in the wake of the pandemic when Bitcoin remained resilient compared to the traditional stock market. Investors turned to Bitcoin as alternative investments to conventional markets.
Large financial firms like PayPal are now supporting cryptocurrency. Simultaneously, institutions like Square and MicroStrategy have used their fiat reserves to buy large amounts of Bitcoin, and the 30% BTC addresses might belong to such entities. Notably, these institutions’ entry has contributed to the surge in Bitcoin price to new all-time highs.
Furthermore, before the entry of institutional investors, BTC addresses with large amounts of the asset constituted early Bitcoin adopters who control millions in crypto assets.
From the data, the highest number of Bitcoin addresses holds the least amount of Bitcoin. This group possibly constitutes retail investors who might not have a large pool of money to invest in the sector. These addresses might hold the BTC over the fear of missing out and betting that the price will keep surging in future. Generally, these investors are primarily expected to take long-term holding positions with no intentions of selling.
The high addresses with less Bitcoin’s share might also be due to the fact that the crypto sector still has risks. Such holders might be playing safe as the crypto sector still has some uncertainties, especially from the regulatory front.
Unlike large Bitcoin holders, addresses with less Bitcoin do not have a lot of influence on the asset’s price. However, during Bitcoin last all-time in 2017, such holders are believed to have played a key role.
Large Bitcoin holders impact on price volatility
The addresses with high Bitcoin reserves constitute the Bitcoin whales who have a lot of influence on the asset’s price movement. Such addresses are known to increase Bitcoin’s volatility as the concentration of wealth, especially if it is unmoved in an account, it lowers liquidity, which can increase price volatility. The volatility is further increased if such addresses move a large quantity of Bitcoin in a single transaction.
As more institutional investors enter the crypto space, the number of whales is projected to increase, leading to larger order sizes alongside high trading volumes. However, the market is maturing to accommodate the new players. With time, it will possibly lead to reduced volatility.