Bitcoin Wallet Distribution: Uncovering the Ownership Landscape

Bitcoin wallet distribution is a complex landscape, with various types of wallets serving different purposes. Most users own multiple wallets, with 71% of respondents in a survey owning two or more wallets.

The majority of users, 63%, store their Bitcoin in online wallets, which are accessible through the internet. These wallets are convenient but also pose a risk of hacking and theft.

In contrast, 22% of users store their Bitcoin in desktop wallets, which are installed on a user's computer. Desktop wallets offer more security than online wallets but require users to have technical expertise to set them up.

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Bitcoin's distribution is a complex beast, but let's break it down. The smallest entities, like Shrimps and Octopus, have seen relative growth in their share of the circulating supply, while the largest entities, like Whales, Miners, and Exchanges, have experienced significant contractions.

The Yearly Absorption Rate is a useful metric to understand the balance change of each cohort relative to new supply entering the market. A positive absorption rate means a cohort is growing, while a negative rate means it's shrinking.

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Here's a rough breakdown of the different entity cohorts and their absorption rates:

Miners, in particular, are an interesting case. Their share of the circulating supply has declined significantly over time, from 100% at genesis to just 3.77% today, not including Patoshi coins.

Miners play a crucial role in the Bitcoin ecosystem, and one of the most common misconceptions about them is that they have an outsized ability to hoard coins. In reality, the total balance held by Miners has declined from 100% ownership at genesis to just 9.5% at present date.

Miners collectively own just 3.77% of the circulating supply today, which is an overestimation if we exclude the Patoshi coins that are increasingly likely to be lost over time.

The Yearly Absorption Rates for miners show a gradual expenditure of the accumulated balance across all miners throughout history, with a net decline of 1.05 to 1.1 BTC for every 1.0 BTC that is mined.

In certain periods, such as 2020-22, miners even absorbed slightly more BTC than was mined, coinciding with the emergence of publicly traded mining companies with greater access to capital markets to fund operations outside direct sales of produced coins.

Exchanges have played a significant role in the distribution of Bitcoin, often acting as a middle-man for the majority of coins that change hands.

Since the collapse of Mt Gox in 2013, coins have continually flowed towards exchanges until March 2020.

A structural change occurred in March 2020, causing coins to flow out of exchanges at increasing rates, directed towards self-custody investor wallets, institutional and collaborative custody services, and exchange traded products.

This effect was supercharged after the collapse of FTX, resulting in the largest monthly outflow of -200k BTC/month in the Nov-Dec 2022 period.

The 2017 bull run saw exchange balance growth reach its historical peak, growing by an equivalent of 177% of issued coins over that year.

Here's a summary of the key events affecting exchange balances:

A wallet linked to Mt. Gox has begun test transactions for potential creditor distribution.

The wallet, believed to be Bitgo, received $2.19B in Bitcoin from Mt. Gox.

This movement signals progress in the long-awaited distribution of funds to Mt. Gox creditors.

The distribution is a significant development in the crypto industry's largest bankruptcy case.

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UkuriaOC, Checkmate plays a significant role in analyzing Bitcoin's supply distribution, particularly in understanding the flow of capital and cohort behaviors of the holder base.

The distribution of coins is often misunderstood, with critics misquoting large wallets as evidence of a heavily concentrated supply held by a small group of whales.

Entity-adjustment clustering algorithms, implemented by UkuriaOC, Checkmate, and Glassnode, improve accuracy and precision in measuring economic activity on-chain, isolating large entities like exchanges or ETF products.

These algorithms enhance the signal-to-noise ratio for using on-chain data to make decisions.

By collating and grouping multiple addresses deemed to have a single entity owner, these tools provide a more accurate representation of Bitcoin ownership.

This approach shows that BTC ownership disperses over time, and is less concentrated than often reported.

Large entities are identified and isolated, allowing for a clearer understanding of the distribution of circulating supply.

Bitcoin Ownership is a significant aspect of the Bitcoin ecosystem.

As of 2022, an estimated 18% of Bitcoin addresses are owned by individuals, while the remaining 82% are held by exchanges, payment processors, and other entities.

The majority of individual Bitcoin owners hold small amounts of the cryptocurrency, with 80% of addresses containing less than 0.1 BTC.

The concentration of wealth among individual owners is skewed, with 1,000 addresses holding approximately 2.8 million BTC, or about 12% of the total supply.

The anonymity of Bitcoin addresses makes it difficult to determine the true ownership of the cryptocurrency, but research suggests that a significant portion of individual owners are located in the United States.

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Blockchain Data plays a crucial role in the Bitcoin wallet distribution. The Bitcoin blockchain is a decentralized, public ledger that records all Bitcoin transactions.

It contains information about each transaction, including the sender, receiver, and amount transferred. This data is used to verify the integrity of the blockchain and ensure that transactions are valid.

The blockchain is also home to over 19 million unique addresses, which are used to send and receive Bitcoins. These addresses are generated using complex algorithms and are unique to each user.

Each transaction on the blockchain is verified by nodes on the network, which helps to prevent double-spending and maintain the integrity of the blockchain.

Bitcoin supply is an interesting topic, and it's fascinating to see how it's distributed among different entities. The smallest entities, known as Shrimps, hold less than 1 BTC.

These tiny holders account for a significant portion of the circulating supply, and their numbers have been growing over the past two years. In fact, the Shrimps, Crabs, and Octopuses have all seen relative growth in their supply share.

The largest entities, on the other hand, have experienced significant contractions in their supply share. Whales, Miners, and Exchanges have all seen a decline in their share of the circulating supply.

To better understand these changes, let's take a look at the Yearly Absorption Rate, a new metric that provides insight into the level of expansion or contraction a cohort has experienced relative to new supply entering the market.

Here's a summary of the Yearly Absorption Rate for each cohort:

As you can see, the Shrimps have had a relatively high absorption rate, indicating that their share of the circulating supply has grown significantly over the past year.

Bitcoin's rich list is a fascinating topic, and it's interesting to note that the top 1% of Bitcoin holders own approximately 33% of all existing Bitcoins.

The top 10 Bitcoin holders control a staggering 57% of all existing Bitcoins, with the largest holder owning around 1.1 million Bitcoins.

These large holders have accumulated their wealth over time, and it's worth noting that the majority of them are individuals, not institutions.

In fact, the top 100 Bitcoin holders account for over 50% of all existing Bitcoins, with the largest 10 holders controlling around 40% of the total supply.

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