Good day everybody,
I hope you are all having an excellent day, welcome to CryptoGod-1's blog on all things crypto. In this post I will be looking at how the remaining, and existing, supply of Bitcoin is distributed. With the next halving fast approaching, getting a better understanding of the components of Bitcoin and its supply sources is an important metric to understand.
Existing Bitcoin Holdings
One of the most important things to understand when looking at Bitcoin is not only its total supply, but also where the majority of it is held. Thanks to the level of transparency associated with the public ledger it is possible to track (and somewhat estimate) where the Bitcoin is currently distributed. In July of 2023 this ability of tracking through addresses, public announcements and some estimation across data sources, roughly 47% of the total supply of Bitcoin is known. This is because it is estimated that a large portion of the overall supply has already been lost, and this includes the coins held by its creator Satoshi Nakamoto. This would indicate that roughly 4 million Bitcoin, out of the total supply of 21 million, have already been lost.
Of the remaining Bitcoin, large amount are held between a variety of exchanges, Bitcoin miners wallets, and the Grayscale trust. On top of that, the likes of MicroStrategy, Tether, and the Lightning Network have also accumulated larges amounts of the 'digital gold'. Wrapped Bitcoin (WBTC), which basically allows users to make use of Bitcoin on other blockchains, is another large holder. One of the more interesting holders in the large player scale is the U.S. Government, who have managed to grow a large bag of Bitcoin through their many seizures from criminal activity. It is less well known how much other governments may be in possession of, with speculation that China have 194,000 Bitcoin, but this is unconfirmed.
When looking at the 2.3 million Bitcoin located on exchanges, it is clear to see that the majority is present on Binance and Coinbase. Back in 2019 Binance was known to have roughly 10% of the Bitcoin on exchanges, but is closer to 30% today. That would equate to around 700,000, mainly due to the fact Binance operates as a derivatives marketplace and has a dominance in the marketplace with their international presence. Coinbase meanwhile is more of a spot exchange which mainly works from the United States.
As time has gone by the amount of Bitcoin circulating on exchanges has reached 17.5% of the overall circulating supply, which peaked in March of 2020 before its decline to 11.89%. It is generally taken that the amount of Bitcoin circulating on exchanges will continue to decrease as Bitcoin distributes across an increased number of global adopters. Added to this are the increasing availability of personal custody solutions on the market.
When considering the long and short term holders supply, there has never been this level of long term holders in Bitcoin. Only twice before, in relative terms (when the amount mined was less than it currently is), there was a larger share of long term holders in 2009 prior to Bitcoin having an exchange rate, and in the depths of the 2015 bear market. With so much of the current supply off the market, this can result in large price pressure and adjustments to the downside, as many market participants step back and play more of a passive role.
By also looking at the illiquid supply of holders, meaning entities that rarely sell and their coins are often unavailable for trading (calculated illiquid if the Bitcoin holdings have less than 25% of those received been spent, or highly liquid if over 75% have been spent), then in the post 2016 halving era Bitcoin has it highest illiquid supply as a percentage of circulating supply. This is because holders are removing Bitcoins off the market quicker than miners can distribute them. As of this April 2023, bitcoin’s illiquid supply surpassed 15,000,000 coins.
The data compiled from Glassnode and Chainanalysis is clear: Bitcoin continues to distribute into more hands and has a greater concentration of supply shifting from entities holding large amounts of Bitcoin (balances of 1,000-10,000 BTC, 10,000-100,000 BTC, and greater than 100,000 BTC) to entities holding balances of 10 BTC or less.
It is worth noting that those holding large amounts of Bitcoin, often those with 10,000 or more, are likely to be managing keys for thousands or even millions of users, exchanges being an obvious example. This is an important factor when considering wealth distribution, as it the large sum is divided amongst multiple holders.
Some interesting information available and it gives a very clear view of how Bitcoin is spread amongst different holder. The original breakdown of the data is available at Glassnode and Chainanalysis for further information.
Have a great day.
Peace. CryptoGod-1.
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