Not So Decentralized: A Third of Entire Bitcoin Market Cap in 1,600 Wallets

A report from Chainanalysis, a blockchain research company, suggested a tiny group of 1,600 wallets own a third of the entire bitcoin market cap, amounting to about $37.5bn.

Potential to Disrupt Market

In April 2018, about 1,600 wallets were containing over 1,000 bitcoin (BTC), roughly $7.5 million each, amounting to a total of $37.5 billion. This mysterious group of investors is referred to as “whales“ because of the size of their bitcoin holdings and their potential market impact.

The fact that such a tiny group of people controls around five million bitcoin or a third of the current bitcoin supply is concerning news for smaller investors as it potentially means that a massive sell-off may plunge the market to tremendously low prices.

As reported by BTCManager, a Japanese “whale” dumped $400 million worth of bitcoin in March 2018, single-handedly forcing the price to plunge.

According to data from Chainanalysis, over 100 bitcoin wallets in existence contain between 10,000 and 100,000 BTC, equivalent to $75 million and $750 million at the time of writing respectively. Any sudden movement by such wallet holders could substantially distort the market. Unarguably, the move goes against the creed of decentralization and free distribution that initially formed the basis for bitcoin and blockchain technology.

Is Bitcoin Compromised?

Far from its original ethos of escaping the centralized control of money and the possibility of an alternate financial system, the figures indicate bitcoin is primarily treated as an alternate speculative asset within the existing economic system. Investors and holders of large bitcoin sums are placing smaller market players at risk by deliberately moving the market to their benefit.

Philip Gradwell, the chief economist of Chainanalysis, said:

“This concentration of wealth means that bitcoin is at risk of volatility, as the moves of a small number of people will have a large effect [on the price].”  

Furthermore, the report claims that the widely-reported cryptocurrency bull market in December  2017 price spike was pronounced by several large holders cashing out their investments at high prices.

Large Capital May Have Left Market

According to the data, the number of bitcoins held by people for more than one year in April 2018 is nearly three times less than in November 2017, which indicates a lot of long-term speculative capital has exited the market.

Gradwell added:

“This was an exceptional transfer of wealth and conditions for it to occur again are unlikely to form again soon.”

However, experts continue to warn that the bitcoin market remains susceptible to manipulation by ‘whales’ who know and communicate with each other, effectively rigging the market against smaller users.