The recent Bitcoin rally to as high as $ 42,000 was largely driven by institutional investors who suddenly woke up and saw the asset’s long-term value potential. Shop now means not paying extremely high prices one day if it eventually catches on.
And while FOMO has paid off to cryptocurrency investors from wealthy individuals looking to protect those assets, the continued centralization of BTC and wealth could have dangerous consequences that the asset’s creator tried to avoid. Therefore, the institutional buying wave may not be as positive as it appears on the surface.
The great wealth transfer from cash to Bitcoin, nothing more
Bitcoin price is currently at $ 37,000 per coin and has never been more in demand while the world is still ravaged by a global pandemic. Unemployment has never been higher either, and everyday citizens crave stimulus money to pay the bills or to cover the cost of food and other basic necessities.
More capital is flowing into Bitcoin than ever before. And unlike 2017, it’s not just retail money. Retail investors are back, but the price per BTC is even higher this time around. They are not the ones who are buying up a massive chunk of the limited cryptocurrency supply at these levels.
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You are buying negligible amounts that add to the overall upward momentum, but the increase in price is mainly due to wealthy institutions buying bitcoin in large sums.
Massive OTC buy orders that happen behind the scenes are taking away the low supply from the market that used to be sold. It made many early crypto and retail investors who survived the bear market rich, and that was a positive change in the global distribution of wealth.
Institutional buying is said to be driving up the price per BTC | Source: BTCUSD on TradingView.com
However, with whales absorbing such a significant portion of the Bitcoin supply, it is not the same decentralized good that caught the attention of early evangelists who hoped for better financial health for everyone.
Forget about financial freedom when cryptocurrency is centralized by current wealth
Bitcoin as a technology enables a free financial future, but because it is offered in a free market – as it should be – it will be possessed over time and thus take control of the presently wealthy people of the world.
Satoshi Nakamoto, the original creator of the cryptocurrency, tried to free the world from third party control over money. But if most of the Bitcoin supply is owned by the few, was the distribution of wealth even affected by its originally intended creation?
Whale wallets with 1000+ BTC or more continue to accumulate | Source: glassnode via Arcane Research
Unfortunately the answer is no. Even with the recent “crash” of the cryptocurrency, wallets already holding 1,000 BTC or more continued to buy coins. Only those who are already rich can afford to keep buying coins for $ 35,000 each, and those who already have $ 35,000,000 in a single wallet can absolutely be classified as “already rich”.
Bitcoin could have brought them that wealth, and that’s wonderful. But will cryptocurrency evangelists cheer when most of the supply is controlled and centralized in corporate coffers rather than citizens seeking financial freedom?
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Over 2,400 wallets have 1,000 BTC or more, which together corresponds to 2.4 million of the total of 21 million Bitcoin deliveries. This means that only 2,400 individuals or organizations own up to 10% of the scarcest resource that has ever existed.
And while these companies are pumping the price of Bitcoin for all of the crypto investors who got in before, Bitcoin’s original intent is clouded by the increasing centralization of those same ancient assets.
Without a real change of guard, the cryptocurrency has failed at least part of its original mission.
Featured image from Deposit Photos, Charts from TradingView.com