Early investors of cryptocurrencies are reaping the benefits of an entirely new category, especially holders of Bitcoin (Crypto: BTC). Turns out, most bitcoins (55%) are deposited in digital wallets that have at least 200 coins. These BTC addresses are valued at more than $1 million USD when the cryptocurrency is at $5,000 or higher, according to research by Diar published this week.
The firm finds that 25% of bitcoins are held by long-term investors; 30% are lost and illiquid; 17% are held as speculative investments; 15% are located in exchange wallets and 13% are transactional.
Many Bitcoin holders have been transformed into millionaires by virtue of their belief in decentralized money. Just six years ago, it wasn't uncommon for a buyer to purchase bitcoins for anywhere between $6 to $20 per coin. By August 2013, the price had risen to $100.
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"Bitcoin is the application of free-market principles to money in the digital age. It is the alternative to centralized government control," said economist Jeffrey Tucker in 2017 interview with this writer. "It is the replacement of an old technology with a technology that is connected to the lives of real people…. Governments will try to hold it back but this is a hopeless battle in the long run."
Investing $10,000 during the summer of 2013 would have given you roughly 1,000 bitcoins worth $6.34 million today. That's a 6,240% return on investment. Not bad considering that Google stock would "only" have yielded $1,265% ROI since its $85 initial public offering (IPO) price back in 2004.
But holding Bitcoin is not without risks. The same survey finds that one-third (30%) of bitcoins have never made an outgoing transaction and it "could indicate either lost private keys, lowering real supply, or a very strong resolve by cryptocurrency believers," according to Diar's researchers.
"Over 87% of Bitcoins are stored in wallets that are above 10 Bitcoins ($60K+) – the total value just shy of $100Bn of the total market capitalization," per the same study. "However … the largest wallets are owned by cryptocurrency exchanges that are holding the coins on behalf of clients. In fact, 3.8% of the total bitcoin supply are currently sitting in the top 5 wallets that are known to be managed by major exchanges – approx. $4.2Bn in value."
Since 2011 more than 980,000 Bitcoins have been stolen from hacked exchanges, according to Reuters. And according to Chainalysis, a blockchain-analysis firm, nearly one-fifth of all bitcoins are lost or inaccessible, most of it permanently. Ouch!
Chainalysis also found in April 2018 study that one-third of Bitcoin supply are concentrated in the hands of 1600 individuals.
"It's true that in the past, governments have usually outlawed private money. But there is a difference this time," said Tucker. "Bitcoin lives on a distributed ledger. It is pure math and its platform is global and immutable. Governments can no more outlaw bitcoin than they can outlaw algebra."
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