Less Than 1% of Bitcoin Addresses Control Nearly 87% of BTC's Supply, Analysis Finds

Francisco Memoria

China’s state-run financial publication National Business Daily (NBD) has recently conducted an analysis of all bitcoin addresses, and found that about 0.7% currently control 86.9% of the flagship cryptocurrency’s circulating supply.

The reported used data from BTC.com and concluded that these addresses owned roughly $62 billion worth of the cryptocurrency, and that out of the 22.65 million addresses with some BTC in it, 97.2% have less than 1 bitcoin. Only 0.7%, the report adds, had over 10 BTC in them.

Distribution of all of Bitocin's addresses

After taking a closer look, NBD’s reporter, according to 8BTC, found that these addresses controlled roughly $62 billion worth bitcoin, while the other 97.2% with less than 1 BTC controlled 4.6% of the cryptocurrency’s circulating supply, less than $4 billion.

The study also found that the addresses on with the most BTC belong to cryptocurrency exchanges like Binance and Bitfinex. It noted that various large addresses may belong to more than one person, and that it makes sense for exchanges to have the largest addresses as these hold funds for thousands of users.

The existence of other ‘bitcoin whales’, the reporter added, is worrisome for investors looking to enter the market as large buy and sell orders can have a significant impact on the market, but would represent a fraction of their holdings.

According to CryptoCompare data, it would take a 2,027 BTC sell order, worth $7.8 million, to send bitcoin’s price down 10% on Coinbase, the largest cryptocurrency exchange in the United States.

Last year, cryptocurrency enthusiasts noticed a mysterious whale moved over $100 million worth of BTC to cryptocurrency exchanges, and the price of bitcoin dropped over $400 in 90 minutes, presumably because of a large sell order.

A report published last year by blockchain analytics firm Chainalysis found that only 14% of all bitcoin addresses belong to private investors, and that only 37% of the addresses on the flagship cryptocurrency’s network are “economically relevant,” as the rest as used to facilitate payments.

CME Looks to Double Bitcoin Futures Limit, but Is This Wise?

The Chicago Mercantile Exchange (CME) has a new request for its regulator, as it looks to double open position limits on bitcoin futures contracts in the face of significant interest.

Nasdaq reports that the CME has already petitioned its regulatory body, the Commodity Futures Trading Commission (CTFC), asking for an increase from 1000 contracts per spot month to 2000 per investor. Each contract represents five BTC, so essentially, at its peak,  a single investor's total position may edge towards a monumental 10,000 BTC.

This is in direct response to the contract's recent growth which is currently depicting record levels of activity, citing $370 million being traded per day. A spokesperson for the CME noted that the idea to increase limits was proposed on the continued maturity of the market:

Based on the significant growth and acceptance of our financially-settled CME Bitcoin futures markets, as well as our analysis of the underlying bitcoin market.

However, as Nasdaq writes the increase in the upper limit of positions is somewhat superfluous. As of July, the number of open interest contracts reached an all-time high of just 6100; given this, it seems the CME may be future-proofing.

Open to Manipulation?

However, concerns remain about the limit increase, as without them, the potential for manipulation rises; often to the detriment to the underlying asset. Although, as per the CTFC website, the threat of manipulation from bitcoin futures contracts is "low":

In general, position limits are not needed for markets where the threat of market manipulation is non-existent or very low.

Instead, Nasdaq posited that this might point to a lessening on the CTFC's strict rule of bitcoin; as well as a maturing of the market in general.

Nevertheless, some believe the CME's bitcoin futures contracts do pose a significant threat to the price of BTC; with some suggesting that blatant manipulation continues unchecked within the market.

As reported, there seems to be a correlation between the expiry dates of CME bitcoin futures contracts and a lull in the price point of BTC. In several instances, a significant drop in bitcoin's price has coincided with a closure from the CME. The most recent example of this occurred on Labor Day, September 2, when bitcoin rose an extraordinary 8% shortly after the CME shut.

Crypto analyst, Alex Kruger, highlighted this, noting the large gaps which formed on the CME chart, from the price discrepancy before and after closing.

This has become a pretty accepted practice within the market. Kruger has even gone to the lengths of compiling statistics each time this phenomenon transpired:

On these occasions, bitcoin cited an average 4.6% price discrepancy following the close of the CME.

Whether this is a coincidence or the market is indeed being actively manipulated is as yet unclear. Either way, with the increase of these limits it might be only a matter of time until we know for sure.

Featured Image Credit: Photo via Pixabay.com