Institutional Concentration Creates Artificial Scarcity, Fundamentally Changing Market Dynamics

According to new data from analytics firm Santiment, published on May 13, large Bitcoin holders are gaining even more market control. Specifically, Bitcoin wallets holding at least 10 BTC, roughly $1 million, now own over 82% of all the Bitcoin that has ever been mined. This rapid increase in concentration, combined with aggressive purchases from companies like Strategy, is creating a “synthetic halving effect” that could lead to unprecedented liquidity scarcity in the market and calls into question Bitcoin’s original decentralized concept.

How Large Wallets Dictate Market Liquidity

According to the Santiment report, Bitcoin is increasingly concentrated in the hands of wealthy institutional investors, along with a handful of prominent traders. Bitcoin’s total mined supply currently stands at about 19.86 million coins, with the absolute cap set at 21 million. At current prices, wallets holding 100 BTC or more, worth over $10 million each, already hold 60.84% of that supply.

Including wallets with at least 10 BTC pushes this concentration to an estimated 82.51%. Less than 18% of Bitcoin remains in wallets containing under $1 million worth of coins.

“Bitcoin concentration in large wallets has reached a critical level,” comments Elena Markova, crypto analyst at investment company “DigitalAssets.” “With such distribution, even relatively small actions by large holders can cause significant market fluctuations, increasing volatility and potentially creating price manipulations.”

Bitcoin’s absolute cap stands firmly at 21 million coins. Of this finite amount, approximately 94.57% has already been mined. Just 1.14 million BTC await release over the next 115 years. Major holders are increasingly absorbing this limited future supply before it reaches the open market, creating additional scarcity beyond Bitcoin’s programmed constraints.

“Synthetic Halving”: Strategy and Accelerated Scarcity

No firm exemplifies this aggressive acquisition trend more than Strategy. Last month, the firm purchased 15,355 BTC. Then, on May 1, the firm announced a capital raise plan of $84 billion to fuel further acquisitions. A few days later, Strategy bought another 13,390 Bitcoin.

These aggressive buys have a real effect on Bitcoin supply and market trends. Crypto analyst Adam Livingston calls this phenomenon a “synthetic halving” effect.

“Unlike the protocol halving that occurs approximately every four years and reduces miner rewards by 50%, the ‘synthetic halving’ is created by market forces,” explains Dmitry Korneev, cryptocurrency market researcher. “When giants like Strategy systematically absorb a significant portion of newly mined coins, they create additional scarcity that may even surpass the impact of traditional halving, potentially leading to more rapid price growth.”

Bitcoin’s natural halving cycle cuts miner rewards roughly every four years. This built-in mechanism steadily throttles new coin creation, enforcing scarcity. But now, major players like Strategy are pushing scarcity further and faster than the protocol intended. They accomplish this by purchasing substantial portions of newly mined Bitcoin when it hits the market.

Consider the numbers. Post-2024 halving, miners generate just 450 BTC daily. That’s only 13,500 per month. Strategy’s recent monthly buys come shockingly close to swallowing the entire supply. The impact is immediate and profound. Demand jumps while fresh coins vanish almost instantly.

Retail Investors vs. the ‘Synthetic Halving’ Effect

The rising concentration of Bitcoin ownership in a few large wallets has deep implications for the broader Bitcoin market, especially for retail investors.

For example, liquidity dries up when too much supply sits locked away. Low liquidity can cause the market to experience sharper price swings. This drives volatility and makes it harder for everyday investors to enter or exit positions at fair prices.

“Retail investors increasingly find themselves at a disadvantage in a market dominated by whales,” notes Alexei Petrov, financial advisor and cryptocurrency investment specialist. “As liquidity decreases, spreads widen, executing large orders becomes problematic, and maneuvering opportunities for small market participants significantly diminish.”

The Santiment report shows that wallets holding fewer than 10 BTC collectively own approximately 3.47 million Bitcoins. At the current price level, this equates to about $358 billion. These wallets belong to retail investors, miners, and modest traders—the lifeblood of Bitcoin’s decentralized ethos. Yet the scales keep tipping. Large holders steadily accumulate more coins, squeezing the little guys.

When markets tumble or uncertainty looms, retail investors often panic. They sell to secure profits or cut losses, but their exits create opportunities. Deep-pocketed whales and institutions swoop in, snapping up discounted coins. The cycle repeats. Ownership grows more concentrated as the gap widens.

Bitcoin Centralization Paradox: From Rebellion to Replication?

In 2008, Satoshi Nakamoto unveiled Bitcoin: A Peer-to-Peer Electronic Cash System with a bold goal of creating a decentralized currency, free from banks and governments. The whitepaper was a direct rebellion against the financial system’s failures—the same system that collapsed that year, exposing the dangers of centralized control. Bitcoin was meant to be different. No single entity would hold power—instead, a global network of users and miners would keep the system fair, open, and resilient.

“Satoshi Nakamoto envisioned Bitcoin as a democratizing force that would provide financial independence to billions of people excluded from the traditional financial system,” reflects Nikolai Smirnov, researcher of cryptocurrency history and blockchain philosophy. “However, current concentration data suggests we’re moving in the opposite direction, replicating the very hierarchies Bitcoin sought to liberate us from.”

That was the promise. Yet 17 years later, that promise is fading. The concentration of Bitcoin into fewer hands mirrors the traditional financial hierarchy it was designed to dismantle. Without intervention—whether through mass adoption, redistribution, or new policies—Bitcoin risks becoming just another asset class ruled by a wealthy few.

The irony is stark because what began as a tool for financial liberation may end up replicating the very system it sought to destroy.

Implications for Different Types of Investors

The growing concentration of Bitcoin has varying implications depending on the type of investor:

For Institutional Investors:

• Benefits: Ability to accumulate significant positions; increased market influence; potentially higher returns from future price appreciation.
• Risks: Regulatory attention; liquidity issues when attempting to exit large positions; potential reputational threat from association with centralization.

For Retail Investors:

• Benefits: Potentially higher prices if scarcity increases; ability to participate in the market with small volume.
• Risks: Increased volatility; vulnerability to market manipulation; potentially higher entry and exit costs due to reduced liquidity.

For Miners:

• Benefits: Potentially higher prices for selling newly mined coins; strong buyers for their product.
• Risks: Dependence on a small number of large buyers; possible monopsonistic effects suppressing prices; long-term network security concerns due to centralization.

“Miners are in a particularly interesting position in this changing dynamic,” explains Maria Ivanova, economist and cryptocurrency mining specialist. “On one hand, companies like Strategy provide stable demand, but on the other hand, excessive concentration may lead to a non-competitive market for their product, potentially affecting the long-term sustainability of the mining industry.”

Long-term Outlook and Potential Solutions

The current trend toward concentration raises questions about the long-term prospects of the Bitcoin ecosystem. Several possible scenarios and solutions may evolve:

1. Market Self-Regulation: If concentration becomes too high, potential liquidity problems and manipulation may prompt some large holders to sell off, naturally redistributing coins.
2. Regulatory Intervention: Governments may consider antitrust or regulatory actions against excessive concentration, though the effectiveness and desirability of such intervention remains contentious.
3. New Financial Instruments: Innovations such as fractionalized ownership and improved Bitcoin ETFs may provide broader indirect participation, mitigating some negative aspects of direct concentration.
4. Evolution of Market Structure: As DeFi and other financial innovations develop, new models for owning and using Bitcoin may emerge, potentially diversifying control over market volatility.

“Perhaps we are witnessing the natural evolution of any financial asset,” suggests Victor Zubov, professor of financial markets. “Historically, all valuable assets begin widely distributed but over time concentrate in the hands of the most competent and wealthy market participants. The question is whether Bitcoin will find the right balance between market efficiency and the ideals of decentralization that underlie it.”

Conclusion: Finding Balance in the Era of Bitcoin Institutionalization

Santiment’s data on Bitcoin ownership concentration presents a dual narrative. On one hand, growing institutional investor interest legitimizes Bitcoin as an asset class and potentially increases its value through “synthetic halving” mechanisms. On the other hand, this concentration calls into question the fundamental vision of a revolutionary and decentralized monetary system.

What began as a radically democratic experiment increasingly resembles traditional asset ownership structures from which Bitcoin originally sought to depart. This paradox has no simple solution, but it underscores the importance of ongoing dialogue about Bitcoin’s role in the future global financial system.

For investors—both retail and institutional—understanding this changing dynamic is crucial for navigating an increasingly concentrated Bitcoin market. As wallets with 10+ BTC continue to absorb available supply, strategies for different market participants must adapt, acknowledging the new reality of diminishing free liquidity and growing economic power of those controlling the majority of coins.

Whether this concentration is merely a transitional phase or a permanent characteristic of the Bitcoin ecosystem remains to be seen. However, one thing can be said with certainty: the present state of Bitcoin ownership is quite far from the egalitarian dream presented in Satoshi Nakamoto’s original whitepaper.