The distribution of holding coins sparks heated discussions! Is BTC still the people's currency? Or has it completely become a game of capital?

Highly concentrated holding of coins, triggering questioning of 'Decentralization'

In the cryptocurrency industry, Bitcoin has long been dubbed the "people's currency" - it attempts to eliminate the layers of restrictions in the traditional financial system (TradFi) through decentralization and blockchain technology. Advocates of Bitcoin claim that it can create a trustless decentralized economy, where every user can be a direct participant in transactions. However, a newly released data shows that nearly 75% of Bitcoin is held in just 2% of wallet addresses in the market. Does such a high level of concentration impact the foundation of Bitcoin's decentralization?

Image source: BitInfoCharts 2% of Bitcoin wallet addresses hold nearly 3/4 of circulating Bitcoin

According to financial analyst Vik Aggarwal, cited by BitInfoCharts data, 2% of Bitcoin wallet addresses hold nearly 3/4 of the circulating Bitcoin. Aggarwal wrote on the community platform LinkedIn that this asset distribution is inconsistent with the 'Decentralization' dream originally portrayed by Bitcoin, and he believes it goes against the original intention of Satoshi Nakamoto.

He questioned, "Bitcoin was supposed to be decentralized and give people financial freedom from central banks, but in reality, it is controlled by a few whales."

If the whale of holding coins is to sell, it will affect the market volatility

Some investors have pointed out that if these large holders or so-called 'whales' decide to sell their bitcoins all at once, it could potentially trigger a drastic price fluctuation. Aggarwal mentioned an incident where a Chinese company caused a flash crash of $649 million, implying that if a few large holders were to sell at the same time, it could severely impact the market. For retail investors and small-scale investors, the high concentration of holdings undoubtedly increases financial risks, which is not conducive to the goal of a 'people's currency' and is vulnerable to manipulation and speculation.

However, Bitcoin enthusiasts also raised objections. Those who support the Decentralization concept of Bitcoin believe that the so-called 'decentralization' should focus on the consensus mechanism of the Bitcoin network (Proof of Work) and the distribution of the overall network nodes, rather than simply looking at 'who holds more coins'. Some commentators point out that the core of 'Decentralization' lies in the blockchain consensus protocol, while centralization is a result of market behavior, which does not hinder Bitcoin from operating as the underlying technology of a Decentralization network.

Institutional capital enters, Decentralization value is challenged?

It is worth noting that many institutions and corporate investors have actively laid out Bitcoin recently, which is seen as a positive signal; but at the same time, concerns have also arisen: will institutions absorb a large amount of Bitcoin and further push up the concentration of holdings? Some people believe that Bitcoin's ability to be favored by large financial institutions and investors, thereby increasing its liquidity and market value, is a symbol of maturity; but some are worried that after the expansion of market whales, the status of small investors may be marginalized, or even deviate from the original intention of "anyone can participate".

As the price of Bitcoin repeatedly hits new highs, it becomes increasingly difficult for retail investors to accumulate enough Bitcoin, while the wealthy and institutions can more easily expand their positions, deepening the centralization of holding coins. Observers generally call for the market to continue to examine the network structure and distribution of Bitcoin to ensure that it can still adhere to the core mission of Decentralization.

Future Trends: A Compromise between Ideals and Reality

Despite Bitcoin being hailed as the 'people's currency', the reality shows a highly centralized distribution structure. Regarding the controversy surrounding 'Decentralization', some supporters emphasize Bitcoin's consensus mechanism and network security, while critics focus on coin distribution and market stability. With the continuous influx of institutional capital and the ever-changing global regulatory environment, the future of Bitcoin remains a major question.

At this time, striking a balance between the ideal (public goods and Decentralization) and the reality (capital concentration and whale influence) will be a key issue for the future development of Bitcoin. Perhaps only by continuously strengthening the security and transparency of the consensus mechanism, encouraging more investors to participate and diversifying coin ownership, can Bitcoin be closer to the original concept of "people's currency".

[Disclaimer] The market is risky, and investment should be cautious. This article does not constitute investment advice. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific situation. Invest at your own risk.

"The distribution of holdings sparks debate! Is Bitcoin still the people's currency? Or has it become a purely capitalistic game?" This article was first published in "Crypto City"