A new study by the National Bureau of Economic Research (NBER) argues that there seem to be a limited number of individual investors who currently control around one-third of the entire Bitcoin (BTC) supply in circulation.
What this means, the research suggests, is that one of the most popular cryptocurrencies out there is still controlled by a small portion of all participants, going against the grain of the idea that BTC would democratize finances and avoid centralization as such.
The research has been based on extensive information and other research that has looked into data provided by brokers, traders and cryptocurrency exchanges, along with illegal services.
The NBER offered a detailed breakdown of who controlled how much, arguing that intermediaries controlled around 5.5 million BTC at the end of 2020 and individuals controlled another 8.5 million.
An estimated 1,000 investors seem to hold another 3 million worth of BTC tokens. These investors are referred to as “whales” and they are often linked to big changes in the price of BTC.
The exact price of these BTC owners’ cryptocurrency is hard to determine because in January 2021, BTC was worth $32,000 and it briefly surpassed $62,000 this weekend. Today, the currency is trading at $60,900 but more fluctuations in its value are naturally expected.
The authors of the research, London School of Economics’ Igor Makarov and MIT Sloan School of Management’s Antoinette Schoar argue that they have the most complete information about crypto entities and their holdings.
The data collected by the researchers features 393 crypto exchanges, 86 gambling operators, 39 online wallets, 63 mining pools, 151 dark net market places and other illegal services, 33 payment processors and more.
There are even 35 scammers and 227 ransomware attackers featured in the research. The research established that some $550 million of BTC is flowing to addresses associated with crypto scams. Some $1.6 billion worth of BTC has been forwarded to dark net payments and other illegal activities, the research claims.
More importantly, though, the researchers argue that the distribution of BTC is not “fair” and that the concentration of capital in individuals could lead to systematic risks for the entire blockchain system. What’s worse is that any future gains would fall disproportionately to the whales and generally a small set of participants.