The combined cryptocurrency market has exploded to $2.6 trillion this year as mainstream investors flock to digital assets .
Since last year’s time, the bitcoin price has risen by almost 400% to $60,000. Bitcoin has dropped sharply in the past 24 hours, falling below the closely-watched $60,000 mark.
Researchers found that bitcoin is still held by a few holders ahead of the price drop, which means it’s ‘bitcoin vulnerable to systemic risk’.
“Our results indicate that, despite the considerable attention bitcoin has received over recent years, the bitcoin ecosystem remains dominated by large, concentrated players, whether they be large miners or bitcoin holders, or exchanges,” analysts from the National Bureau of Economic Research reported.
“This inherent concentration makes bitcoin vulnerable to systemic risks and also means that most of the benefits from further adoption will likely fall disproportionately to small groups of participants.
Researchers discovered that the top 10,000 bitcoin holders had 27% of total 18.6 millions coins in circulation as of the end 2020. There was a high concentration of bitcoin exchanges and miners, who are those who secure bitcoin blockchains in return for newly-minted coins. The top 10% of bitcoin miners hold 90% of the capacity. Only 0.1% of all miners contribute 50%.
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‘This measurement is of concentration most likely an understatement because we cannot rule out the possibility that some of the biggest addresses are controlled by a single entity,” researchers Igor Makarov, and Antoinette Schönar wrote. They pointed to the many early bitcoins that were likely all controlled Satoshi Nakamoto, but are scattered across around 20,000 addresses.
Researchers warned that bitcoin’s high concentration could make it vulnerable to a 51% attack. This would mean that miners could conspire to steal transactions. This happened in 2014, when Ghash.io temporarily controlled 51% all of the bitcoin network’s processing powers.
Regulators and central bankers are worried about the massive rise in bitcoin and crypto this year, which has seen the market grow from $700 billion to more than $2.5 trillion.
Jon Cunliffe (currently serving as the Bank of England’s deputy governor for Financial Stability) warned that a collapse in crypto-asset values was possible . He also called for regulation of the rapidly growing bitcoin and crypto markets to stop it from becoming a threat to wider financial systems.
Despite warnings and the drop in bitcoin to $60,000, crypto traders and bitcoin remain optimistic.
“The bulls are still aiming for a three figure end to the year. However, somewhere between $70,000 and $90,000. is more realistic. Three figures could potentially occur towards the end 2022’s second quarter,” Tim Frost, chief executive of Yield, stated in an email comment.
A panel of 50 cryptocurrency and bitcoin experts forecasted that the bitcoin price would continue rising through 2021. It will reach highs of $80,000 before spiking to $250,000 in 2025, and then to $5 million by 2030.