The top 10,000 investors control more than 33 percent of the Bitcoin supply, weakening the argument that cryptocurrency will democratize finance.

It can be difficult to determine who owns the most Bitcoin because many of the largest addresses — the unique identifiers that serve as a virtual location where the cryptocurrency can be sent — often represent crypto exchanges or intermediaries that hold Bitcoin on behalf of other investors rather than individuals, Bloomberg reported.

However, the National Bureau of Economic Research used a data collection method that differentiated between addresses belonging to intermediaries and individuals. Professors from the MIT Sloan School of Management and London School of Economics mapped out and analyzed every Bitcoin transaction since the crypto launched 13 years ago. They found that intermediaries including crypto exchanges controlled about 5.5 million Bitcoin at the end of 2020 while individuals controlled about 8.5 million. Also, the top 1,000 individual investors controlled about 3 million.

“This measurement of concentration most likely is an understatement since we cannot rule out that some of the largest addresses are controlled by the same entity,” researchers Igor Makarov and Antoinette Schoar wrote.

Almost 90 percent of all Bitcoin — 18.77 million coins — have already been mined with the total supply capped at 21 million coins.

Crypto enthusiasts have long argued that cryptocurrency will decentralize and democratize finance by redistributing power away from rich Wall Street brokers and governments to people who have traditionally been excluded from access to money and investing.

“Through the revolutionary blockchain technology that powered it, the digital coin was meant to even the financial playing field, eliminate intermediaries such as banks, and maybe even replace fiat altogether,” wrote Remy Jacobson, chairman of the board at RealT and co-founder of blockchain consulting firm Bunker Capital. “… the truth is that neither banks nor fiat currencies have gone away, and crypto doesn’t remotely pose a threat to either.”

The top Bitcoin holders control a greater share of the cryptocurrency than the richest U.S. households control in dollars, according to the research, Wall Street Journal reported.

How?

About 114 million people hold Bitcoin, according to crypto.com. The top 10,000 Bitcoin accounts hold 5 million Bitcoins worth about $232 billion. That means that approximately 1 percent of Bitcoin holders control 27 percent of the 19 million Bitcoin in circulation, WSJ reported.

By comparison, the top 1 percent of U.S. households hold about a third of all wealth in the U.S., according to the Federal Reserve.

The new research suggests that crypto has an inequality problem that is “worse than the United States’ disgraceful performance under the dollar,” Mack DeGeurin wrote for Gizmodo.

Image credit: Tevarak / iStock, https://www.istockphoto.com/portfolio/Tevarak?mediatype=photography

Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?