Examining Bitcoin Supply.

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Who Holds The Bitcoin?

Bitcoin’s public ledger provides a unique level of transparency that includes significant information detailing where the bitcoin supply is located. Through address tracking, public announcements, and estimation across data sources, we can get a sense of where nearly 47% of the total bitcoin supply is today. A significant portion of bitcoin’s 21 million supply is estimated to be lost, including Satoshi Nakamoto’s coins, and both Glassnode and Chainalysis suggest that nearly 4 million bitcoin has been lost.

Other large amounts of bitcoin are on exchanges, in the Grayscale trust, or in bitcoin miners’ wallets. Swaths of bitcoin have been accumulated by the likes of MicroStrategy, and more recently Tether. Some 5,500 bitcoin are locked up on the Lightning Network, while other sums exist as wrapped bitcoin (WBTC) on blockchains besides Bitcoin.

Most bitcoin estimates can be tracked on a routine basis when looking at examples, like known U.S. government-associated on-chain addresses from various bitcoin seizures, or when analyzing monthly production updates from public bitcoin miners, while other holding details can be much harder to come by. A private institution may have indicated bitcoin holdings years ago, but isn’t required to publicly announce updates of their stash. Other instances include uncertainty around government holdings. China may have 194,000 bitcoin from seizure, but it’s difficult to verify if this number is current.

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All that said, the below chart is a rough cut of available data that can be expanded upon and improved for better accuracy across different groups. These figures come from on-chain forensics, public SEC filings and balance sheet attestations.

Of the 2.3 million bitcoin on exchanges, the majority resides on Binance and blockchain. This wouldn’t include bitcoin in investment custody products like Grayscale and blockchain Custody, for example. Binance’s share of bitcoin on exchanges has risen from under 10% in 2019 up to 30% today. The company is estimated to have nearly 700,000 bitcoin on their platform, which can predominantly be attributed to their derivatives marketplace dominance and their international presence, whereas blockchain is mainly a spot exchange with a heavy U.S. presence.

Over time, the amount of circulating bitcoin supply on exchanges has reached 17.5% of circulating supply, reaching its peak in March 2020 before declining to just 11.89%. We suspect that the trend of declining bitcoin on exchanges as a percentage of circulating supply will continue as bitcoin distributes across an increased number of global adopters, thanks to sophisticated personal custody solutions becoming more mainstream and robust as time goes on.

In absolute terms, there has never been this level of long-term holders in bitcoin. In relative terms, the only two times in history with a larger share of long-term holder coins is in 2009 before bitcoin had an exchange rate, and in the depths of the 2015 bear market. With so much of the supply off the market, sell-side pressure in the interim can result in large price adjustments to the downside, since many market participants are partaking in more of a passive role.

We can also look at bitcoin’s illiquid supply to quantify holder dynamics. The term “illiquid supply” refers to bitcoin that are held by entities that rarely sell, meaning these coins are not readily available for trading. To quantify this, an entity’s bitcoin holdings are deemed illiquid if less than 25% of its received bitcoins have been spent, liquid if 25% to 75% have been spent, and highly liquid if over 75% have been spent.

The amount of bitcoin that is not available for trading has reached a new high since the halving event in 2016. This is due to holders accumulating coins at a faster rate than miners can distribute them. As of April 2023, more than 15,000,000 coins are considered illiquid. The concentration of supply is shifting from entities holding large amounts of bitcoin to those holding 10 BTC or less. It’s important to note that entities holding large amounts of bitcoin are often managing keys for thousands or even millions of users, making claims of a lack of wealth distribution of bitcoin misleading. Bitcoin’s ownership structure is more transparent and auditable than traditional currency. Bitcoin is being adopted by a broad range of holders, from individuals to corporations and even nation-states. The trend of increased distribution and declining concentration is expected to continue.