One of the most popular methods used to look at the growth of BTC is by checking the number of active addresses. However, this can be misleading. The reason for this is that BTC can sometimes be held in a single address but different people own it. For instance, an exchange could hold BTC in its wallet address for multiple users.
How to Get Over the Issue
To deal with the issue, glassnode recently used a new approach to understand the BTC network. In their study, glassnode checked all entities holding BTC and not the number of BTC addresses. They used the term “entity” to define a BTC address that holds funds for multiple users.
They found that the number of new entities represented a small fraction of the number of new BTC addresses created in the BTC network. For instance, they found that the number of new entities created daily was about 100,000 in 2019. In the same period, the number of addresses added to the BTC network was over 355,000.
They also found that the number of entities containing BTC was 23.1 million up to January this year. This is less than the number of BTC addresses holding BTC, which is 28.5 million. In the study, they found that there were about 1910 entities, which own more than one BTC. Besides that, they found that only 75 entities own over 10,000 and only seven entities hold over 100K BTC. These seven entities are all exchange, and Coinbase is the largest, they are:
- Coinbase – 983,800 BTC
- Huobi – 369,100 BTC
- Binance – 240,700 BTC
- Bitfinex – 214,600 BTC
- Bitstamp – 165,400 BTC
- Kraken – 132,100 BTC
- Bittrex – 118,100 BTC
At the time of the study, the exchanges controlled over 2,350,000 BTC, which represents about 13% of all BTC in circulation. The study suggests that there has been a consistent growth in the number of new entities since BTC was created. It indicates that BTC has experienced consistent adoption in the last decade. By press time, the price of BTC had gone back above $9000, which is contrary to some predictions made by some in the crypto sector. This will only encourage more entities to join the BTC network.
Centralized Control
The study has helped to highlight just how much power centralized exchanges hold in the crypto sector. It is a bit ironic considering that BTC was created as a way to avoid centralized control. It is worth noting that in the recent past, various decentralized exchanges have emerged in the crypto space. However, these exchanges only account for a small fraction of all BTC trades.
For now, the crypto world will continue to rely on centralized crypto exchanges since there is no viable alternative. These exchanges usually represent a major security issue since when they are hacked; it usually leads to millions of losses for investors. It is thus paramount that as a trader, you do not store all your crypto on an exchange unless you are using to trade.
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