The recent Bitcoin rally to as high as $42,000 has been predominantly been driven by institutional investors suddenly waking up and realizing the asset’s long-term value potential. Buying in now means not paying ultra-high prices someday down the line if it ultimately catches on.
And while FOMO from wealthy individuals seeking to protect that wealth has been rewarding for cryptocurrency investors, the ongoing centralization of BTC and wealth could have dangerous consequences down the line, that the asset’s creator had sought to avoid. Here’s why the wave of institutional buying might not be as positive as it seems on the surface.
The Great Wealth Transfer From Cash To Bitcoin, Nothing More
Bitcoin price is trading at $37,000 per coin currently and has never been in higher demand, all while the world is still under the grips of a global pandemic. Unemployment has also never been higher, and normal everyday citizens are clamoring for stimulus money to help them pay the bills or to cover the cost of food and other basic necessities.
Yet more capital is flowing into Bitcoin than ever before. And unlike 2017, it isn’t only retail money. Retail investors are back, but the price per BTC is even higher this time around. They aren’t the ones buying up a massive share of the limited cryptocurrency’s supply at these levels.
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They’re buying negligible amounts that do contribute to the overall upside momentum, but the price appreciation has predominantly been due to wealthy institutions buying Bitcoin in large sums.
Massive OTC buy orders taking place behind the scenes are taking what little supply out of the market that used to be sold. It has made a lot of early crypto investors and retail investors who survived the bear market wealthy, and that’s been a positive change in global wealth distribution.
Institutional buying is said to be driving up the price per BTC | Source: BTCUSD on TradingView.com
However, with whales absorbing such a sizable share of the Bitcoin supply, in isn’t the same decentralized asset that caught the attention of early evangelists hoping for a better financial situation for all.
Forget Financial Freedom If Cryptocurrency Becomes Centralized By Current Wealth
Bitcoin as technology enables a free financial future, but because it is offered on a free market – as it should be – over time it is coming into possession and therefore the control of the world’s currently wealthy.
The cryptocurrency’s original creator, Satoshi Nakamoto sought to free the world from third-party’s control over money. But if most of the Bitcoin supply is owned by the few, has the distribution of wealth at all been affected by its emergence as originally intended?
Whale wallets with 1000+ BTC or more continue to accumulate | Source: glassnode via Arcane Research
Sadly, the answer is no. Even with the recent cryptocurrency “crash,” wallets who already own 1,000 BTC or more kept on buying coins. Only those already wealthy can afford to keep buying coins at $35,000 each, and those who already own $35,000,000 USD worth in a single wallet absolutely can be classified as “already wealthy.”
Bitcoin could have made them that wealthy, and that’s wonderful. But will cryptocurrency evangelists cheer when the bulk of the supply is controlled and centralized at corporate treasuries and not citizens seeking financial freedom?
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Over 2400 wallets own 1,000 BTC or more, for a combined 2.4 million of the 21 million total Bitcoin supply. That means only 2400 individuals or entities possess as much as 10% of the most scarce resource to ever exist.
And while these entities are pumping the price of Bitcoin for any crypto investors who got in before they did, the original intent of Bitcoin is becoming clouded by increased centralization of the same old wealth.
Without a real changing of the guard, the cryptocurrency will have failed at least a portion of its original mission.