The total value of bitcoins stored in the wallets of states, public and private companies is $175 bLn, according to VanEck’s analytical review. According to CoinGecko, this amount accounts for only 15% of bitcoin's total capitalization. Is it possible that companies and states will have more bitcoins than private investors? What will happen then?
Theoretically, it is possible for institutional participants to become the owners of a larger portion of bitcoins compared to individuals. However, it is unlikely that this will happen anytime soon. Bitcoin was designed as a decentralized peer-to-peer system, and its mass adoption by individuals remains a key factor in its success and viability.
If large players such as states, companies and foundations were to acquire an overwhelming share of bitcoin, this could threaten the decentralized nature of the network and open the way to centralization and control over it. This would go against bitcoin’s original philosophy.
In such a scenario, the value and attractiveness of bitcoin could plummet for many retail investors and users. This could lead to a depreciation and loss of interest in BTC as a decentralized digital currency.
On the one hand, the limited supply of bitcoin in free circulation due to its accumulation by large holders could push up the price in the short term according to the laws of supply and demand. However, on the other hand, the low liquidity of the market makes it vulnerable to price swings and crashes due to the triggering of margin positions. The high concentration of bitcoins also creates the risk of market manipulation by large holders.
If the majority of bitcoin ends up in the hands of a few large holders, this could make it difficult for them to liquidate their positions in a low-liquidity market in the future and take profit.
In the long term, bitcoin's concentration could undermine its decentralized nature and credibility as a currency independent of third parties. This could slow down its mass adoption and development.
Maintaining a significant distribution of bitcoin among many holders, including individuals, is important to maintain the liquidity, price stability and decentralization of this cryptocurrency. Excessive concentration does pose serious risks to bitcoin's long-term prospects.