Demystifying Bitcoin's Ownership Landscape

WOM B&W
Will Ogden Moore
Last Update 11/29/2023
  • Bitcoin ownership is widely distributed across a variety of groups. 74% of Bitcoin owners hold less than around 0.01 worth of Bitcoin (~$350 as of November 6th, 2023).
  • Around 40% of Bitcoin ownership falls into identifiable categories, including exchanges, miners, governments, balance sheets of public companies, and dormant supply.
  • Significantly, some of these groups represent “sticky supply,” which could increase the impact of demand related tailwinds, including the 2024 Bitcoin halving or a potential spot Bitcoin ETF approval.

As we approach the end of 2023, two events loom large: the 2024 Bitcoin (“BTC”) halving and a potential spot Bitcoin ETF in the US. Both events could potentially expand the scope and breadth of investors seeking access to Bitcoin. One common misconception is that a small number of individuals predominantly own large holdings of Bitcoin. However, this is factually inaccurate. Because the Bitcoin blockchain is transparent, any individual can monitor information on Bitcoin in real-time, including its ownership structure. Data from a wide variety of sources — including Glassnode, Arkham Intelligence, Bitinfocharts, and Bitcoin Treasuries — shows that Bitcoin supply is widely distributed among a variety of individuals, groups, and organizations around the globe.

In this piece, Grayscale Research attempts to clarify common questions around Bitcoin ownership, and delve into implications of various ownership groups. We also discuss the stickiness of Bitcoin supply[1], why it is particularly relevant right now, and what it could mean for the asset in the future.

Bitcoin Ownership is Widely Distributed

A significant majority of Bitcoin holders are small investors, as approximately 74% of Bitcoin addresses hold less than 0.01 BTC, worth around $350[2] as of November 6th 2023, as seen in Figure 1 below. In contrast to other historically high risk, high return assets, like private equity and venture capital, that are only available to accredited investors, Bitcoin is accessible to a global retail audience (with access to the internet). As such, Bitcoin’s ownership structure reflects the decentralized, open-source nature of Bitcoin’s technology. In reality, only 2.3% of all Bitcoin owners own 1 BTC or more (worth around $35K per Bitcoin as of November 6th, 2023).

Figure 1: Distribution of Bitcoin addresses

Note: For ease of visibility, Dollar numbers are rounded to reflect one Bitcoin as worth $35,000

In addition to Bitcoin ownership primarily spread across multiple small holders, most of Bitcoin’s largest holders represent “the many” rather than a few. As of November 6th 2023, each of the top five wallet addresses by Bitcoin holdings are either crypto exchanges or government entities, as outlined in the chart below.

Figure 2: Top 5 Overall Bitcoin Wallet Addresses by Balance

Note: Often exchanges hold multiple wallets/addresses which is why Binance appears here multiple times. Source: Bitinfocharts, Grayscale Investments. Data and holdings in USD as of 11/14/2023. Bitcoin price in this chart is equal to $36,891.

Notably, exchange addresses — like Binance and Robinhood — represent millions of individuals. For example, Robinhood has 11 million monthly users owning and trading Bitcoin on their platform[3], and Binance, one of the largest crypto exchanges in the world, has almost 90 million monthly active users[4]. Additionally, the US Government address above represents institutional rather than individual ownership.

Bitcoin is held by institutions ranging from exchanges to public companies to major governments. While some members of these groups may overlap with others[5], around 40% of the total supply of Bitcoin can be attributed to identifiable ownership groups, such as exchanges, government entities, public and private companies (e.g., Tesla and Block Inc.), mining companies that secure the Bitcoin network, ETFs and other publicly-traded funds,  wrapped BTC[6], consumer trading platforms (e.g., Robinhood), and dormant addresses. Each of these groups can be seen below.

Figure 3: Bitcoin Identifiable Supply

Note: Grayscale’s holdings are reflected in the “ETFs and Funds” Category. This category includes futures based products and other funds that hold Bitcoin. Sources: Bitcoin Treasuries, Arkham Intelligence, Glassnode, Bitinfocharts. Note: There may be some overlap between some groups (e.g. supply last active 10 years ago and Miners). All data as of 11/13/2023. For illustrative purposes only and is subject to change.

It is important for investors to understand and analyze the largest owners of Bitcoin, and the potential implications of these holders on Bitcoin’s supply dynamics.

Some of these specific ownership categories reflect potentially sticky supply dynamics – in other words, owners who take a long-term position on a particular asset. For example, 14% of Bitcoin supply has not moved in 10 years[7]. We believe this portion of supply can be attributed to original coins owned by Satoshi Nakamoto, lost coins or addresses, and decade-long holders. As seen below, decade-long inactive supply has been growing since 2019 and is currently at an all-time high.

For illustrative purposes only.

Other ownership groups that seem to indicate relatively sticky levels of supply include miners and exchanges, which account for 20% of total supply (~9% and ~11% respectively). As can be seen below, despite substantial changes in Bitcoin’s price over time, these two ownership groups have historically remained relatively price inelastic[8]. This may be because miners accumulate Bitcoin as rewards over time, often only selling what’s needed to cover operating costs. In the past, periods of miner net outflows, such as November 2022[9], have had a relatively minimal impact on the overall miner balance of Bitcoin. This indicates that a large proportion of miners’ overall Bitcoin balance likely consists of long-term holders. Certain levels of price inelasticity in the short-term may also extend to other ownership groups, such as Wrapped BTC (1.25% of total supply), due to Bitcoin locked in smart contracts.

So, what is the significance of these ownership groups indicating price inelasticity? 

In the short-term, relative levels of price inelasticity among Bitcoin owners could heighten the impact of demand-related tailwinds. This can be compared to “low float” stocks in the traditional financial markets, stocks that possess a low percentage of a company's shares that are available for trading in the open market. For example, a sudden change in demand for a low float stock in combination with a reduced amount of actively traded supply off the market could potentially result in an outsized impact on price. Given the various inactive or price inelastic Bitcoin ownership groups, this dynamic could prove particularly relevant to Bitcoin.

Conclusion

Bitcoin ownership is distributed and diverse. Further, Bitcoin ownership among respected institutions indicates a maturation of the Bitcoin markets and increased public acceptance and mainstream adoption.

Looking ahead, global political and regulatory developments could greatly impact continued adoption and demand for this asset. For example: a potential spot Bitcoin ETF in the US could further remove friction for individuals and institutions looking to allocate to Bitcoin, and the recent presidential election in Argentina could signify a shift in how developing economies consider Bitcoin and other crypto assets. As of November 2023, there are approximately less than six months until the 2024 Bitcoin halving.

Meanwhile, amidst these demand-related tailwinds, the Bitcoin supply remains remarkably constrained; the illiquid and long-term holder supply has soared to unprecedented levels, while the short-term supply has dwindled to its lowest levels[10]. If these trends continue, the Grayscale Research team anticipates that the dynamics of Bitcoin’s ownership could increasingly amplify the impact of macro events, like evolving global policies and regulation (e.g., approval of US spot Bitcoin ETF), as well as crypto market developments, like the 2024 Bitcoin halving.

Our team will be watching these developments closely, and will share more information as we’re able. You can sign up here to join Grayscale’s mailing list to stay apprised of relevant updates.

 

[1] Sticky supply is defined as supply that is relatively price inelastic or unlikely to sell in the short term.

[2] Worth approximately $350 as of November 6th, 2023

[3] Robinhood

[4] Similar Web, Bankless Times

[5] Some members of these groups may have overlap with others (e.g. inactive supply and miners or public companies and miners)

[6] Wrapped BTC refers to Bitcoin that is locked in a smart contract and held as a derivative on another blockchain (e.g. Ethereum)

[7] Glassnode

[8] An individual or a group of consumers whose demand for a particular good or service shows relatively little responsiveness or sensitivity to changes in its price.

[9] Glassnode

[10] Glassnode

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