Centralized Entities Hold 31% of Bitcoin Supply, Boosting Institutional Confidence

Centralized treasuries have accumulated a substantial portion of the Bitcoin supply, holding approximately 31% of the total circulating Bitcoin. This concentration is distributed across various entities, including centralized exchanges, exchange-traded funds (ETFs), public companies, private companies, decentralized finance (DeFi) protocols, and governments. The top three entities in nearly all categories, except for private companies, control between 65% to 90% of the total assets, underscoring the influential role of early adopters in shaping the trajectory of institutional Bitcoin adoption.

The shift in Bitcoin holdings from centralized exchanges to ETFs and other custodians has been notable. Over the past two years, Bitcoin balances on centralized exchanges have declined, but this has not led to a supply shortage. Instead, the majority of the Bitcoin has been redistributed to ETFs and funds, particularly U.S. spot ETFs. This redistribution reflects a structural change in custody rather than a reduction in overall supply. The total BTC held by the spot trading sector has remained relatively stable, fluctuating between 3.9 million and 4.2 million BTC, indicating that the liquidity available for spot trading has stayed largely consistent.

The creation of the U.S. Strategic Bitcoin Reserve has significantly boosted institutional confidence in Bitcoin as a sovereign-grade asset. Following the announcement of the Strategic Bitcoin Reserve, public and private companies have increased their Bitcoin purchases, further solidifying Bitcoin's status as a strategic, long-term asset. This shift has been catalyzed by long-term investments and strategic custody, leading to a structural change in the market.

The concentration of Bitcoin holdings in the hands of centralized entities has implications for the market's stability and liquidity. While early adopters continue to dominate holdings, the increasing acceptance of Bitcoin as a sovereign-grade asset has boosted institutional confidence. The overall supply available for spot trading has remained stable, despite the redistribution of custody from exchanges to ETFs and other custodians. This stability suggests that the market is adapting to the structural changes brought about by institutional adoption, with Bitcoin's role as a strategic asset becoming more entrenched.

This shift towards centralized ownership affects market stability, highlighting institutions' growing influence over Bitcoin's ecosystem. The centralization impacts Bitcoin's market stability by reducing volatility, with large amounts held for strategic purposes rather than speculation. This change carries implications for decentralization concerns, as concentrations might result in significant influence over market mechanics and valuation. Similar trends were observed with Bitcoin ETF approvals in 2021, boosting institutional holdings significantly. This reflects ongoing institutional interest. Potential outcomes include a more stable market yet more concentrated power among centralized institutions, influencing future cryptocurrency policies.