What percentage of bitcoin is controlled by “big wallets” and whether they control the market. The categorization of investors by Glassnode, warns of misleading statistics.

A recent Bloomberg report states that “2% of accounts control 95% of all Bitcoin.” They’re not the only ones who claim it. Others have reported statistical data showing a huge concentration of wealth in bitcoin’s network by a few individuals or entities. Is that true, or is it a misunderstanding?

According to Glassnode, the largest specialized cryptocurrency research firm, the problem with these reports is that they analyze the distribution of Bitcoin to network addresses. This leads to misleading statistics on currency ownership, which is much less concentrated than is often reported. In fact, Bitcoin’s diaspora has expanded over the years.

In particular, Glassnode says:

  • a) Not all Bitcoin addresses should be treated as the same. For example, an address that belongs to an exchange includes money from millions of users. It cannot be treated as an address of a person.
  • b) A user can have more than one address and an address can keep money from multiple users.

Bitcoin addresses are the main public addresses recorded on the blockchain that send and receive Bitcoin. Through applications with advanced grouping algorithms, one can recognize with great confidence which addresses are controlled by the same user.

Glassnode has categorized the entities of the network according to the Bitcoins they own, into the following marine species:

Shrimp (less than one)
Crab (1-10 BTC)
Octopus (10-50 BTC)
Fish (50-100 BTC)
Dolphin (100-500 BTC)
Shark (500-1,000 BTC)
Whale (1,000-5,000 BTC)
Humpback (huge whales) (> 5,000 BTC).

At the far end of the spectrum, whales and humpbacks are the largest entities that are not exchanges and control a total of 31% of bitcoin. These are foundations, funds, custodians, OTC offices, and very wealthy individuals.

Smaller entities that own up to 50 Bitcoin each (shrimps, crabs, and octopuses) control nearly 23% of the supply. This shows that a significant proportion of currencies are in the hands of individuals.

The shift towards a more expanded Bitcoin holding in many entities in recent years is apparently evident.

  • Smaller players (shrimp + crabs) have increased their holding by 130% since 2017.
  • The second smallest holders (octopus + fish) also increased their ownership in Bitcoin by 14% in this time period.
  • On the other hand, large entities such as dolphins, sharks, and whales have reduced their participation by -3% and -7%, respectively.

As of early 2020, the amount of Bitcoin held by whales and humpbacks increased by 13.4%. However, the number of these entities increased in a larger proportion, especially in 2021. This reinforces the belief that many wealthy and institutional investors have entered the space.

Currency categorization

A different form of categorization applies to specific cases of Bitcoin owners:

  • Lost coins. Many lost coins come from the early days of Bitcoin’s creation before there was an easy way to store them. In the early stages, to send, receive, and store Bitcoin, you needed to know to program. Moreover, many people had perceived it as a game, they didn’t take it seriously. As a result, a lot of bitcoin must have been lost.

If we take into account the lost currencies, the conclusion that comes out is that the dispersion of Bitcoin is even greater than the one mentioned above. Addresses that have never moved their currency amount to 2.6 million Bitcoin. This effect is particularly true for small entities (e.g. shrimp), which means that their actual number is probably much lower.

  • Wrapped BTC. Currently, there are about 115,000 Bitcoin bound to WBTC. It is a token that plays the role of custodian and is based on Ethereum, which holds at least 1,000 Bitcoin. These coins belong to more than one entity, without knowing their exact number.
  • Exchanges. Exchange users have a big impact on the number of Bitcoin owners. The estimated number of users is 130 million. It is reasonable to assume that the vast majority of them are private investors belonging to smaller categories, such as shrimp, crabs, etc. If we include exchanges in our calculations, the number of small entities increases significantly.

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