Bitcoin is the largest and arguably most sensationalized of all the cryptocurrencies available, and it is often used as the gauge for the state of crypto assets overall. Bitcoin is also extremely concentrated in how it is owned, a fact recently highlighted in a study done by finance professors who took the time to map every single bitcoin transaction over its 13-year span of existence, reports the Wall Street Journal.
The study, done by two finance professors, Antoinette Schoar from the MIT Sloan School of Management and Igor Makarov from the London School of Economics, found that just 0.01% of owners of bitcoin control over 27% of all the tokens in circulation.
This finding indicates that the bitcoin network is highly susceptible to risk due to a lack of diversification of ownership, and also that as more bitcoin is being bought and as prices go up, it’s a very small percentage of investors who are reaping the majority of the gains.
“Despite having been around for 14 years and the hype it has ratcheted up, it’s still the case that it’s a very concentrated ecosystem,” Schoar said about bitcoin.
Bitcoin may have gotten its start as an access-for-anyone network, back when mining for bitcoin only required downloading the software and away you went, but these days the costs have been driven so high for crypto mining that it’s relegated to a handful of enterprise-level firms that can afford the equipment and energy bills. It’s part of a whole trend within the bitcoin network of centralization where miners and crypto exchanges are growing increasingly wealthier as bitcoin rises in price.
Investing More Broadly Reduces Risk
For investors looking to capitalize on bitcoin gains but also diversify their exposure across the cryptocurrency spectrum, the Grayscale Digital Large Cap Fund (GDLC) is a way to gain exposure to the top-performing cryptocurrencies.
GDLC carries digital assets on a market cap-weighted basis that is calculated from the Digital Asset Reference Rates provided by Traceblock Inc., and is rebalanced quarterly. Coinbase is the custodian for the fund.
Currently the fund is made up of a 60.26% allocation to bitcoin, 30.85% to ethereum, 3.62% to solana, and 2.79% to cardano. In addition, it carries several smaller allocations such as litecoin and uniswap.
GDLC carries an expense ratio of 2.5%.
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