As bitcoin becomes more and more mainstream, its spirit is also taking a detour.
This post is going to highlight, how the recent influx of institutional capital into BTC isn't a good thing.
Everyone is jumping for joy as the value of their BTC sky rockets. But have you, the little guy really thought about what this means in the future?
In order to arrive, at what I believe, is the answer, we have to address some of BTC's core fundamentals.
First, lets take a look at some of the core promises that Bitcoin started on:
- Decentralized (no longer the case)
- Anonymous (no longer the case, unless with a bitcoin mixer)
- And as a deflationary asset (I debunked this in my last article)
In terms of decentralization, BTC operates more like an oligarchy at the moment rather than a democracy.
Here is the link to the screenshot source for my data.
https://bitinfocharts.com/top-100-richest-bitcoin-addresses.html
If we add up the number of wallets that own nearly 95% of the BTC supply, that comes out to 822,256 entities.
So, you may reply "well that's a very large number, almost 1,000,000. But first that's out of 7.8 BILLION PEOPLE. And remember, this is a global asset. So we aren't counting in terms of USD, Yuan, or Euros.
Mathematically speaking, that's less than 1% of the of the global population. Less than 1% owns 95%.
How is that decentralized?
2371 wallets, own roughly 5M BTC. Or roughly 26% of the total BTC supply.
Meanwhile on the other end of the spectrum, what I consider retail investors, who own .01 to .1 BTC own 183,440 BTC.
Hell even if I add the top 4 BTC wallet address categories, with the smallest amounts, they collectively barely own 15%. And that's being generous because the 1-10BTC category is out of retail's hands now. Who has 50,000-2.5M lying around?
Look the chart is there, and this is not decentralized ownership anymore. It's just the same thing we've seen.
Now before you skewer me about decentralization being the network, not ownership. Let's examine that as well. My source for BTC Hashrate distribution is below.
https://www.blockchain.com/charts/pools
So, what do we have here? Does that seem like a fully decentralized network to you? The unknowns COULD be individual miners, but let's be honest, your Ant Miner S11 isn't enough unless you join a mining pool. And then, it becomes more centralized.
The only definition of decentralization that remains, is the raw number of machines being turned on to validate and process network transactions.
I'm not talking about the physical locations of the machines, but just the number of machines being used to power BTC's blockchain.
But since, a large majority of those machines are in clusters, data centers, server farms, whatever you want to call it. In short, OWNED by a few major entities, then its not really decentralized is it? Because if, even one of the biggest players suddenly shuts down their machines, BTC is going to operate a HELL OF A LOT SLOWER.
Since miners, are also one of the biggest owners of the BTC itself, then in that regard, the decentralization factor is entirely eviscerated. They not only own a large % of the BTC in circulation, but own a large % of the BTC network processing power itself. What happens when they want to simply power down the machine? or governments stop giving them cheap electricity to mine / maintain the network?
If BTC was to have the slightest chance of living up to its promises, then people like Elon Musk should've start accepting bitcoins BEFORE they bought 43,000 BTC (1.5B / ~$35,000-$38,000). Funny right? After he secures a spot among the top holders of BTC, he suddenly plans to accept it?
While this post focuses on BTC, make no mistake, ETH and other alt coins are on the same trajectory. We as a community of crypto owners are allowing more of our assets to be exchanged for FIAT currencies, while other big players are amassing massive sums at our expense. We have to find a way to de-peg crypto prices from fiat currencies. Rather cryptos must have value as individual stand alone assets based on their utility in the real world. Right now, fiat equivalents drive perceived value, but once utility comes into play, ownership will be even more critical. Whatever ADA, XLM, EOS, TRX, etc you own, don't sell it because it's simply worth more FIAT. Sell it because it can give you some form of passive income, say for a DeFi project you believe in and are willing to buy into.
Now, this article's title was about how institutional investors coming in, isn't such a great idea. And I think I need to conclude with that.
Remember in my last article how I addressed the recent USDT scandal? about how they artificially, inflated the number of USDT in circulation, and thus indirectly inflated the price of BTC by investing the excess USDT they minted? If that is an artificial inflation of the value of BTC then.....
When big banks, who "use the printer to go Brrr" (endlessly print money), take those endlessly printed dollars and inject them into BTC market, how is that supposed to help the value of BTC? Isn't it the same thing USDT (Tether) was doing on a much grander scale? If BTC lifers are preaching about how fiats are going to collapse because of runaway fiscal policies, and those very same fiats are now following into BTC, and thus giving BTC more value IN TERMS OF FIAT CURRENCIES, what, I ask, what the fuck is the difference?
What BTC is becoming, is a means for the same actors that mismanaged the real economy, transferring their "soon to be worthless" assets into BTC, and gaining more control / ownership of the crypto economy.
And that's going to end well right?
Your old grey fox
If we were to really have any buying power as ordinary individuals in the future, then we need to abandon the BTC promise and start off fresh. With an asset that is not centralized in every sense of the word. Perhaps one of the alt coins that aren't so heavily concentrated in the hands of a few.
PS - I know I am "fudding "a lot about the state of cryptos lately, but don't think for a second I'm not a fan or believer in the IDEA of cryptos. I just want the crypto phenomenon to stay true to its inception. Naive as I may be.
As always : THIS IS NOT INVESTING ADVICE. DO YOUR OWN DUE DILIGENCE AND RESEARCH. THIS IS JUST ME SHARING MY STORIES AND views / news updates.
https://www.publish0x.com?a=JxboYq4Keg Sign up link for any readers who want to join this fun community.
Alphanova.crypto
Above is the .crypto address for anyone who wants to shoot me some cheddar for my thoughts. Please no BTC or ETH. Network fees are killer. Stick to LTC, XRP, ADA, or TRX. The last 3 are almost free in terms of network fees. Remember - no matter how much you send anywhere, choose a coin that's low in network fees. Anything besides ETH / BTC really...
