Original title: Demystifying Bitcoin’s Ownership Landscape

Original author: Will Ogden Moore, Grayscale Research

Compiled by: Lucy, BlockBeats

Editor's note: A common misconception is that a small number of individuals own a large number of Bitcoins. However, this is not the case. Data from multiple sources including Glassnode, Arkham Intelligence, Bitinfocharts and Bitcoin Treasuries show that the supply of Bitcoin is widely distributed among various individuals, groups and organizations around the world.

Grayscale analysis compares different Bitcoin ownership groups, especially those that show strong price inelasticity, and explains their impact on the Bitcoin market. The article points out that the supply level of illiquid and long-term holders has hit an all-time high, while short-term supply has dropped to the lowest level. This trend may make Bitcoin's ownership dynamics more sensitive, which may exacerbate the impact of global macro events and crypto markets.

Bitcoin ownership is widely distributed among various groups. 74% of Bitcoin holders own less than 0.01 Bitcoin (about $350 as of November 6, 2023).

Roughly 40% of Bitcoin ownership falls into identifiable categories, including exchanges, miners, governments, public company balance sheets, and dormant supply.

Notably, some of these groups represent “sticky supply,” which could increase the impact of demand-related tailwinds, including the 2024 Bitcoin halving or potential spot Bitcoin ETF approval.

As we approach the end of 2023, two important events are gaining widespread attention: the 2024 Bitcoin (“BTC”) halving and the potential launch of a spot Bitcoin ETF in the United States. Both events have the potential to expand the range and breadth of investors seeking exposure to Bitcoin. A common misconception is that a small number of individuals own a large amount of Bitcoin. However, this is not the case. Due to the transparent nature of the Bitcoin blockchain, any individual can monitor information about Bitcoin in real time, including its ownership structure. Data from multiple sources including Glassnode, Arkham Intelligence, Bitinfocharts, and Bitcoin Treasuries show that the supply of Bitcoin is widely distributed among various individuals, groups, and organizations around the world.

In this article, Grayscale Research seeks to clarify some common questions about Bitcoin ownership and dives into the impact of various ownership groups. We also discuss the “stickiness” of Bitcoin’s supply and why it’s particularly important at this moment in time, and how this may impact the asset in the future.

Sticky supply refers to supply that is relatively price inelastic or unlikely to be sold in the short term.

Bitcoin owners are widely dispersed

The vast majority of Bitcoin holders are small investors, with approximately 74% of Bitcoin addresses holding less than 0.01 BTC, worth approximately $350, as of November 6, 2023, as shown in Figure 1 below. In contrast to other historically high-risk, high-return assets such as private equity and venture capital, which are only available to accredited investors, Bitcoin is available to a global retail audience (with internet access). As a result, Bitcoin's ownership structure reflects the decentralized, open-source nature of Bitcoin technology. In fact, only 2.3% of Bitcoin holders own 1 BTC or more (worth approximately $35, 000 per Bitcoin as of November 6, 2023).

Figure 1: Bitcoin address distribution

Note: For readability reasons, dollar amounts have been rounded to $35,000 for 1 Bitcoin.

In addition to Bitcoin being mostly dispersed among many small holders, most of the largest Bitcoin holders represent "many" rather than just a few. As of November 6, 2023, the top five wallet addresses by Bitcoin holdings are either crypto exchanges or government entities, as shown in the figure below.

Figure 2: Top 5 overall Bitcoin wallet addresses by balance

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

It is worth noting that exchanges, such as Binance and Robinhood, represent millions of individuals. For example, Robinhood has 11 million users who hold and trade Bitcoin on its platform each month, while Binance, one of the world's largest crypto exchanges, has nearly 90 million monthly active users. In addition, the above-mentioned US government addresses represent ownership by institutions rather than individuals.

Bitcoin holders range from trading platforms to public companies to major governments. While some members of these groups may overlap with other groups (e.g., inactive supply and miners or public companies and miners), approximately 40% of the total Bitcoin supply can be attributed to identifiable ownership groups such as trading platforms, government entities, public and private companies (e.g., Tesla and Block Inc.), mining companies that maintain the Bitcoin network, ETFs and other public funds, Wrapped BTC, consumer trading platforms (e.g., Robinhood), and inactive addresses. The following chart illustrates each group.

Wrapped BTC refers to Bitcoin that is locked in a smart contract and held as a derivative on another blockchain (such as Ethereum)

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 certain groups (e.g., supply last active and miners in the past 10 years). All data is as of November 13, 2023, is for illustrative purposes only, and is subject to change.

It is important for investors to understand and analyze the largest holders of Bitcoin and the potential impact these holders have on Bitcoin supply dynamics.

Some of these specific ownership categories reflect potentially "sticky" supply dynamics, in other words, these holders hold long-term positions in a particular asset. For example, 14% of Bitcoin's supply has not moved in 10 years. We believe this portion of the supply can be attributed to the original Bitcoin owned by Satoshi Nakamoto, lost Bitcoins or addresses, and holders who have held the asset for up to ten years. As shown in the figure below, the ten-year inactive supply has been growing since 2019 and is currently at an all-time high.

For illustration purposes only.

Other ownership groups that appear to indicate relatively “sticky” supply levels include miners and exchanges, which each hold 20% of total supply (~9% and ~11%) respectively. As shown below, despite considerable changes in Bitcoin price over time, these two ownership groups have historically been relatively inelastic to price. This is likely because miners accumulate Bitcoin as rewards over time, typically only selling Bitcoin that is used to cover operating costs. In the past, periods of net miner outflows, such as November 2022, had relatively little impact on Bitcoin’s overall miner balance. This suggests that miners’ overall Bitcoin balances likely include a large number of long-term holders. Some degree of price inelasticity in the short term may also extend to other ownership groups, such as Wrapped BTC (1.25% of total supply).

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

In the short term, the relative level of price inelasticity among Bitcoin owners could increase the impact of tailwinds associated with demand. This can be compared to "low float" stocks in traditional financial markets, i.e., stocks where a low percentage of a company's shares are available for trading on the open market. For example, a sudden change in demand for low float stocks, combined with a reduction in supply actively traded in the market, could lead to an outsized impact on price. This dynamic could be particularly relevant for Bitcoin given the various inactive or price-inelastic Bitcoin ownership groups.

in conclusion

Bitcoin ownership is decentralized and diversified. In addition, Bitcoin owned by well-known institutions indicates the maturity of the Bitcoin market and the increasing public acceptance and mainstream adoption of Bitcoin.

Looking ahead, global political and regulatory developments could have a significant impact on the continued adoption and demand for the asset. For example: the potential emergence of a spot Bitcoin ETF in the United States could further remove friction for individuals and institutions seeking to allocate to Bitcoin, while Argentina’s recent presidential election could signal a shift in how developing economies view Bitcoin and other crypto assets. As of November 2023, there are less than six months until the 2024 Bitcoin halving.

At the same time, amid these demand-related tailwinds, Bitcoin’s supply remains significantly constrained; illiquid and long-term holder supply has surged to unprecedented levels, while short-term supply has dropped to minimal levels. If these trends continue, the Grayscale Research team anticipates that the dynamics of Bitcoin ownership may increasingly be intensified by the impact of macro events, such as the evolution of global policy and regulation (e.g., the approval of a U.S. spot Bitcoin ETF), and the development of crypto markets , such as Bitcoin halving in 2024.