60% of bitcoins locked away
Bitcoin

60% of all bitcoins are ‘digital gold’ locked away by hodlers

New research from blockchain intelligence firm Chainalysis research also shows that just 13,600 professional traders control the liquidity of Bitcoin’s marketplace

Roughly 60% of all bitcoins in circulation are “digital gold,” socked away for years in long-term investments, according to new research from the blockchain intelligence firm Chainalysis.

So far, 18.6 million BTC has been mined—meaning that there’s just 2.4 million left to discover between now and 2140.

Of those in circulation, 11.4 million, worth about $104 billion at the press time price of $9,128, have been held for many years. Another 3.5 million is used for trading and moves frequently—primarily between exchanges.

“Blockchain analysis isn’t just useful for investigations and compliance. It can also help us analyze cryptocurrency markets to uncover patterns in usage and inform investment decisions.”

CHainalysis

A staggering 3.7 million BTC—worth $35 billion—hasn’t moved from its current address for more than five years, with Chainalysis concluding they’ve been lost.

(Of course, nChain chief scientist Craig Wright, who claims he is Bitcoin creator Satoshi Nakamoto, has said he has access to 1.1 million of those bitcoins. Not that many people believe him.)

Digging into the figures

Chainalysis is better known for supporting law enforcement by examining illicit transactions and helping businesses avoid being caught up in them. But, as its June 18 blog post said: “Blockchain analysis isn’t just useful for investigations and compliance. It can also help us analyze cryptocurrency markets to uncover patterns in usage and inform investment decisions.”

60% of bitcoins are ‘digital gold’
Did Satoshi Nakamoto factor in that nearly 20% of all BTC may be permanently lost? (Photo: Chainalysis)

The company estimates that tens of millions of people hold Bitcoin, and more than five million visit exchange websites every week. However, the club of active BTC traders is surprisingly small.

A maximum of 340,000 people fall under this category—96% are retail traders, while 4% are professional. This effectively means that a group of just 13,600 pro traders control the liquidity of the Bitcoin marketplace. Professional traders are responsible for 85% of the U.S. dollar value of BTC sent to exchanges, prompting Chainalysis to describe them as “the most significant contributors to large market movements.”

Chainalysis also revealed that four companies—Binance, Huobi, Coinbase and Bitfinex—collectively receive 40% of the BTC sent to exchanges. That’s more than the next 10 exchanges combined (which get 36%), “leaving hundreds of exchanges to duke it out over the remaining 24% of transfer volume.”

Perhaps unsurprisingly, crypto-to-fiat exchanges (C2F) also have an upper hand over crypto-to-crypto platforms and those that specialize in derivatives such as futures and options. 

As the authors of the blog post explain: “Our hypothesis is that C2F exchanges have greater liquidity because they’re the exchanges where most users first purchase cryptocurrency, so they are the source of new demand. C2F exchanges are also where users trade Bitcoin for fiat, which means that even those who prefer C2C exchanges would often have to use C2F exchanges to cash out.”

C Sephton is a journalist with an interest in cryptocurrencies, personal finance, and financial inclusion—as well as the challenges the crypto industry faces in achieving mainstream adoption. He owns cryptocurrencies.

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