Bitcoin’s distribution unchanged post-FTX, remains top-heavy with whales dominating
- A dive on-chain at how the distribution of Bitcoins has moved post-FTX
- 70% of Bitcoin's supply is contained within wallets holding at least $1M, suggesting top-heavy distribution
- Wallets with less than $1K beginning to buy again, after selling pressure towards end of last year
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By now, we all know the sordid tale of Mr Bankman-Fried, the one-time crypto prodigy who is now under house arrest in the far-too-comfortable California house owned by his parents.
While the debacle may be old news, unfortunately for crypto investors, the staggering collapse continues to drag down victims. The latest is Genesis, the crypto lender that has filed for bankruptcy, reportedly owing a cool $3.5 billion to its top 50 creditors.
Here, I want to focus on how events of the last couple of months since this latest crypto scandal have affected the distribution of Bitcoin. Because the beauty of the blockchain is that we can track addresses across the entire network, seeing how the 19.27 million bitcoins currently in circulation are distributed.
Bitcoin addresses holding less than $1K fall
The first consequence of the collapse was the fall in small addresses holding less than $1K. These addresses are often referred to as “shrimp”, i.e. small fish.
38.7 million addresses held between $1 and $1K of crypto as FTX fell, which fell to 38.1 million post-FTX. Not the biggest move in the world, but when considering that Bitcoin also fell 20% in price, there were likely wallets above $1K that fell into this basket by virtue of Bitcoin being worth less in USD terms.
Nonetheless, it does highlight that small fry were selling post the FX collapse, with accumulation only coming back now in January. Again worth noting, however, is that addresses containing less than $1K of bitcoin only comprise 2.84% of the total supply.
Holders between $1K and $10K increase
Interestingly, the pattern was quite similar with the number of wallets containing $1 million or greater of Bitcoin. For once, the whales and the fish were in unison, it seemed.
Curiously, I saw the opposite trend when looking at wallets holding between $1K and $10K of Bitcoin. There was a perceptible uptick right after FTX collapsed, which has then slowed into January as the market recovered.
Again, it’s a bit difficult to know what to make of this because the price of Bitcoin has risen so substantially, meaning a lot of the wallets previously classified here may have just been bumped up to the next category, but it is definitely the outlier as every other denomination shows the opposite effect. 4.6% of the Bitcoin supply is contained within wallets holding between $1K and $10K of Bitcoin.
Bitcoin’s distribution remains unequal
You may have noticed that the numbers I’ve thrown out above regarding the percentage of Bitcoin’s supply contained in small wallets is quite small. This is because Bitcoin has quite a top-heavy distribution.
Less than 6.5% of the supply is contained within wallets that hold less than $10K. Meanwhile, over half the entire supply, 51.8%, is contained within wallets holding over $10 million. Expanding to look at all wallets holding greater than $1 million worth of Bitcoin, this figure rises to 70% of the total supply.
The data shows that while Bitcoin is a decentralised, the distribution of its coins is not. Whale wallets dominate, which is a consequence of Bitcoin being so cheap in its early days before going on such a momentous upward price surge.
Throwing $500 or $1000 into Bitcoin only seven or eight days ago would give you jaw-dropping returns, and this is why we see the existence of these massive whale wallets.