Bitcoin Whales
Do we have to worry about who will rule the world if Bitcoin continues to appreciate (among the top holders of Bitcoin currently are Bulgaria, the FBI and the Winklevoss Twins)?
The distribution of Bitcoin and the assumed wealth inequality created by the top holders (whales) is one of the most hotly debated topics surrounding Bitcoin. If Bitcoin really takes off, the current “Bitcoin whales” will become astronomically wealthy. Do we have anything to fear from this shift in world power is a good question. To answer it though, let’s really analyze the current distribution of Bitcoin and the trend of that over time.
Firstly with regards to Bulgaria. It is true that in 2017 Bulgaria acquired ~200,000 BTC via a seizure by Bulgarian authorities related to cyber-crimes committed by a group of hackers. This trove of Bitcoin would currently be worth ~$8bn had the Bulgarian government held onto it. However they did not. It was sold to the public via an auction in late 2017 netting a profit of approximately ~$3.8bn[1]. As of today, it appears they own precisely 0 Bitcoin.
The FBI — the FBI most famously came in to a fortune of Bitcoin following the raid and shutdown of the dark web “Silk Road” marketplace in 2013. However similar to the case of Bulgaria, the US authorities did not hold onto the Bitcoin for long. It was auctioned off in 2014 and bought mostly by Tim Draper at bargain prices. Other more recent seizures of Bitcoin by the FBI have followed similar paths since.
The point is that these entities do not and are not interested in “HODL’ing” Bitcoin. Their collective policy is to quickly sell any Bitcoin seized as part of criminal enterprises and use the profits for department funding, following the same policy that applies to all obtained proceeds of illegal activity.
I’m quite confident that in the not too distant future Governments’ Central Banks around the world will be scrambling to acquire Bitcoin as a reserve asset as fast as they can. When that happens they will sincerely regret not holding onto the Bitcoin their law enforcement services had previously acquired for free. But unfortunately for now, Bitcoin is seen by Governments as too risky an asset to hold onto for any long period of time.
The Bitcoin Rich List
The Winklevoss twins bought approximately ~90,000 BTC in 2013 with $11mm as part of the settlement they had acquired from the Facebook lawsuit. They have held onto it, foreseeing the incredible value proposition of Bitcoin and have furthermore dedicated themselves to creating infrastructure around the Bitcoin network. They launched the New York-based Gemini exchange in 2015 which now boasts over $100mm in daily trading volume.
Their Bitcoin holdings mean — in terms of wealth — they sit alongside other industry titans such as Binance’s Chanpeng Zhao (CZ) on Forbes aptly named “Bitcoin Rich List”[2]. These are all individuals that value decentralization and individual sovereignty — the main tenets of Bitcoin. I do not see anything wrong if tomorrow these would be the ones to “rule the world”. In fact, I think it would be a breath of fresh air for such innovative minds to hold power vs the current establishment of career politicians who do not appreciate even the most basic fundamentals of Economics or Capitalism.
Wealth Inequality
Contrary to popular opinion, the distribution of Bitcoin is actually becoming fairer over time with more Bitcoin being redistributed to small/medium hodlers as time progresses rather than it being centralized in the hands of a few “whales”:
However this does not stop one of mainstream media’s main criticisms of Bitcoin being that a very small proportion of people control a very large proportion of the Bitcoin supply. And that therefore Bitcoin fails to achieve the purported wealth redistribution many of its proponents champion. How to address this? Firstly let’s not forget that every other asset class is subject to the same criticism: oil, gold, diamonds etc are all predominantly controlled by those who were willing to take risk early enough to gain control of a dominating supply. So too it is with Bitcoin.
Nocoiners cannot have it both ways. They cannot on the one hand criticize Bitcoin as a volatile, risky asset not worthy of investment but on the other decry those willing to take the risk and invest early in the asset and thus earn themselves a whale-sized proportion of the supply. Early adopters that take the greatest risk to buy a large proportion of the supply at the cheapest prices will always benefit the most and become the dominant holders long term. This is true with Bitcoin as it as with any asset.
In conclusion though, those early adopters on the Bitcoin rich list (CZ, Winklevoss etc) they all believe in the power of Bitcoin, the innovation it can create and the return to individual sovereignty it allows. This is no bad thing in my opinion. The distribution of Bitcoin is becoming fairer all the time and it is clear that an economy run on Bitcoin would be many times fairer than the current monetary system which does nothing but exacerbate wealth inequality, as we have seen recently.
