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2% of Bitcoin Addresses Control 80% of Wealth: Research

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Over the past years, many bodies have published data on massive wealth concentration in an otherwise decentralized Bitcoin network. Some of these reports have identified that less than five percent of all bitcoins addresses hold about 95 percent of all bitcoins. Research published in 2017 by How Much showed that 1 percent of those addresses had control over half of the bitcoin market.

Joining the ranks of those studies is TruStory, a platform for users to research and validate people’s claims online. The startup’s Founder and CEO Preethi Kasireddy on Tuesday shared new statistics about bitcoin’s so-called wealth disparity problems. She noted that now 2 percent of addresses control 80 percent of the cryptocurrency’s supply.

Statistical Liberty

Penned by Saurabh Deshpande, an analyst at TruStory, the report derived its conclusion by using the Lorenz Curve, a graph that determines wealth inequality. Deshpande admitted that he let go off specific vital parameters that could give a better clarity over bitcoin’s wealth distribution issues. For instance, he observed that cryptocurrency exchanges held a massive number of bitcoins in their cold storage wallets. Deshpande removed those bitcoins from their addresses and mentally reallocated them in addresses holding up to 1 BTC.

“The assumption here is that people with more than 1 BTC would like to store in their hardware wallets,” he explained.

Deshpande took more liberties with data, like introducing an error into the data that considers half of the identified exchange addresses as the newly assumed exchange addresses. He also neglected data for addresses that contain 10–100

BTC, stating it was not available. His adjustments ultimately gave a presumed Lorenz Curve output, as shown below:

bitcoin, lorenz curve

Bitcoin Adjusted Lorenz Curve | Source: TruStory

“Though this wealth distribution is better than the first one, I presume the reality might be slightly better,” Deshpande explained. “Despite this, the distribution is nowhere close to being ideal. I hope the scenario changes and the distribution gets better as time passes. Till then, one of the greatest threats to bitcoin is this curve.”

Criticism

The TruStory’s conclusion of bitcoin wealth being hugely centralized met with criticism. Ari Paul, CIO at BlockTower Capital investment firm, said the “percent of addresses” analogy is not meaningful, considering one could create millions of new addresses with dust units in them and disturb the Lorenz Curve output further.

“The problem is that the denominator is [kind of] a nonsense number. What does the total number of addresses mean or matter?” asked Paul. “A more meaningful measure is something like # of addresses with at least 0.1 BTC. Still doesn’t tell us much, but at least here an “address” has some meaning.”

Civic co-founder & CEO Vinny Lingham, on the other hand, supported Deshpande’s report, hypothesizing that people who started mining on the Bitcoin network in its early days [probably] amassed millions of units of the cryptocurrency. It gave them adequate control over the market.

“Three million coins haven’t moved, and they are still in the hands of a few people,” Lingham asserted.

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Bitcoin (BTC) Price Still Follows Stock-to-Flow Model Despite 48 Percent Correction

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The Bitcoin price is still in line with the much-talked-about stock-to-flow model. Will the coin rally in 2020?

While Bitcoin’s massive 48 percent correction from its yearly high of $13,700 might cast doubt on the new bull market, it actually remains in line with the stock-to-flow (STF) model. Hence, it is not unreasonable to assume BTC could see another rally after the upcoming halvening if the model is valid.   

The first scarce digital object 

The STF model, which was aims to predict the price of the leading cryptocurrency based on its scarcity, was developed by Dutch crypto analyst Plan B.

Commodities with a high STF ratio (the existing stockpile divided by the annual production) are preferred by investors because they are gradually becoming more scarce. For example, gold, which boasts a market cap of $8.4 trln, has a

ratio of 62 while silver only has 22 due to its higher supply growth (1.6 percent and 4.5 percent respectively).         

BTC’s STF ratio is currently at 25 but it will increase after the next halvening in May 2020. The miner reward for each block will be reduced from 12.5 BTC to just 6.25 BTC. It is expected that the ratio will reach 50, which would put “digital gold” very close to the yellow metal. 

Bitcoin Price

image by @100trillionUSD 👉MUST READ

“Almost entirely nonsense” 

However, not everyone is amused by Bitcoin’s STF model. In early November, economist Alex Krüger called it “massively overhyped.” 

Krüger downplays the importance of the supply side if the demand for Bitcoin is not factored in. He believes that demand is the most important factor that drives the BTC price. 

He further doubled down on his criticism, claiming that the model is “almost entirely nonsense.”

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Global Debt to be Worth $12 Million per Bitcoin by Year End

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Bitcoin has achieved market capitalization close to some of the biggest corporations, ranging between $100 and $300 billion. But taken in proportion to the size of the world’s financial system, BTC may have a different valuation.


Debt Issuance Shows No Signs of Slowing

The bloated worldwide debt, fueled by extreme quantitative easing in the last decade, will reach $255 trillion by the end of the year, reported Reuters. The analysis of the Institute of International Finance estimates each person on the planet would carry $32,500 in debt.

“With few signs of slowdown in the pace of debt accumulation, we estimate that global debt will surpass $255 trillion this year,” the IIF said in a report.

Due to bitcoin’s limited supply, it is possible to chart the size of global debt-fueled finance in BTC terms. One bitcoin (as per current aggregated supply) will have to be worth over $12 million to describe the size of the worldwide debt.

The growth of debt comes from governments and government companies, as well as non-financial businesses. A debt bonanza analysis by Bank of America Merill Lynch shows that government debt has ballooned by $30 trillion, companies added $25 trillion, households $9

trillion and banks $2 trillion. All of that additional debt has been accrued since the bankruptcy of Lehman Brothers in the fall of 2008.

Instead of entering a decade of stagnation, central banks poured in liquidity to boost all sectors, leading to significant asset valuation growth. In spite of that, the financial sector carries debt which is 240% of the world’s gross domestic product.

Bitcoin Still Valued Low in Comparison to Size of Financial Sector

It is somewhat difficult to reconcile the idea of sound money, which BTC aims to be, with a debt-fueled economy. But in a way, the current market price of bitcoin reflects the fact that not all funds in circulation are sound, and that debt-based economic activity has been the chief driver of asset valuations in the past decade.

If bitcoin’s value was matched to real economic output, it would be about 60% lower, at around $4 million per BTC. But the presence of debt skews nominal prices.

This potential BTC price has far outpaced the historical highs of the coin. Based solely on the crypto market, bitcoin has peaked around $20,000 in Korea, and at $19,600 in other markets. Some predictions see bitcoin price going to $50,000 again. Experts admit BTC would have reached higher bids if the futures markets did not start swaying the price as well.

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Top 3 Price Prediction Bitcoin, Ethereum, Ripple: Sell the rallies– key theme ahead?

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  • Crypto markets uninspired by short-lived optimism.
  • Top 3 widely traded coins to shed 4+% each on the week.

The world’s no. 1 digital coin, Bitcoin, is seen fading its tepid recovery from 2.5-week lows of 7,007, as we head towards the weekly closing. However, the second most traded cryptocurrency, Ethereum and Ripple, both cling to minor recovery gains so far this Sunday but the further upside lacks momentum, as sellers continue to lurk. The total market capitalization of the top 20 cryptocurrencies now stands at $195.25 billion, as cited by CoinMarketCap.

The top three coins are seen resuming last week’s downtrend into a fresh week ahead, with FXStreet’s Confluence Detector tool enabling to highlight key supports and resistances for better trading decisions.

BTC/USD: Bears headed to November lows

As explained here, Bitcoin failed to sustain it recovery near the $ 7,200 mark, as stiff resistances are aligned there, with the confluence of the previous high on the 4-hour chart and 23.6% Fibonacci Retracement (Fib) level of the weekly price action.

However, if the bulls manage to take out the last, the next resistance near the 7,265 region, the 23.6% Fib of the monthly price action. A break above which will expose the 10-day Simple Moving Average (DMA) at 7,332.

Given that the bears have returned, a test of the 2.5-week lows at 7,007 is back on sight. Note that the multi-week lows also intersect with the Pivot Point 1 Week S1 and Bollinger Band 1D lower, making it a critical demand zone. Should this support be breached, it is likely to accelerate the downside momentum towards 6,750 – Pivot Point 1 Week S2.

ETH/USD: Stiff resistances are packed just ahead of 144

Ethereum has pared the recovery gains, as a pack of resistances just ahead of the 144 handle restricts its every upside attempt. The resistance

zone is a confluence of the Fib 38.2% 1W, previous high on the 4-hour chart and Pivot Point 1D R1.

A sustained break above the last will intensify the recovery momentum towards the next resistance aligned near 147.50, where the 23.6% 1M and 61.8% 1W coincide.

To the downside, the earlier support around 143, the intersection of the 38.2% Fib 1D and previous low on the 15-minutes sticks, is already breached, opening floors for further declines towards the 140 handle – the previous week low.

XRP/USD: Bearish bias intact while below 0.2225

Ripple is seen consolidating around 0.2170 levels, as the immediate upside remains capped near the 0.2180 region (38.2% Fib 1D/ 5-HMA). 

A break above that level, the coin is likely to test the day’s high at 0.2197 beyond which the 0.2220-0.2225 supply zone will grab buyers’ attention. That level is the key confluence of the 200-HMA, 38.2% Fib 1W and 100 4-hour SMA.

On the flip side, the next support is directly seen near 0.2157, which is the previous week low. Sellers are likely to aim for the minor support of the Pivot Point 1W S1 at 0.2135 if the bearish momentum picks up pace.   

See all the cryptocurrency technical levels.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

Source: fxstreet

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