Some of those who entered the market first have amassed huge fortunes, usually benefiting from initial distributions and generous stakes in their own companies.
Who are the big cryptocurrency holders?
It’s likely that many of the early buyers of bitcoin ended up being the richest people on the crypto-currency markets. Many of them promoted a strategy of reshuffling for future profits – “hodling”, in the parlance of cryptocurrency advocates.
One anonymous bitcoin account that started buying the tokens in March 2011 – and never sold any – has a fortune of $4.8 billion, according to crypto-currency analysis site BitInfoCharts.
According to a recent paper by the U.S. National Bureau of Economic Research, the top 1,000 bitcoin investors control around 3 million bitcoins, or roughly one-seventh of the crypto-currency’s total potential supply. Only a small group of these investors have revealed their identities.
Cameron and Tyler Winklevoss, the twins best known for losing a legal battle with Mark Zuckerberg over the social networking idea behind Facebook, bought 120,000 bitcoins in 2012, a haul that, as of mid-November, was worth $7.2 billion.
At an auction in 2014, venture capitalist Tim Draper beat other bidders to buy 29,655 bitcoins that the US Marshals had seized from the Silk Road emporium. The tokens would be worth $1,800 million at today’s prices. Draper declined to say at the time how much he paid at auction, but the Marshals estimated the lot’s value at around $18 million.
Michael Saylor, CEO of software company MicroStrategy, said last year that he had bought 17,732 Bitcoins at an average price of less than $10,000; this holding would be worth $1.1 billion at today’s prices.
After Bitcoin, what about other cryptocurrencies?
The founders of more recent blockchains, such as Ethereum, have also reaped huge fortunes. Vitalik Buterin, its creator, received 553,000 ethers from an initial endowment created by the co-founders, a stake that would be worth $2.3 billion at current prices.
The teams behind several cryptocurrency projects aiming to rival Ethereum have adopted a similar approach, rewarding themselves with substantial portions of their own token stock.
Binance Coin, the token associated with Binance Smart Chain, achieved a market capitalization of nearly $100 billion in four years. The founding team, which includes Changpeng Zhao, the founder of the Binance exchange, has claimed 40% of the token’s total supply.
Solana, a blockchain that has gained popularity as an alternative to Ethereum for decentralized financial applications, sold its founding team just under 13% of the crypto’s total offering at $0.20 per token. At current prices, these tokens would be worth $13.5 billion.
Some analysts have questioned the fairness of these initial token allocations, arguing that they contradict the supposedly decentralized nature of crypto-currency networks.
“These allocations would be fine if you were dealing with companies – it’s not crazy to see this amount of ownership,” says Ryan Watkins, senior research analyst at Messari, a crypto-currency analytics service. “But, when you build systems that are supposed to be more democratic, it’s just not democratic.”
Who has managed to make more money investing in cryptocurrency?
Brian Armstrong, co-founder of cryptocurrency exchange Coinbase, is the richest founder of a public crypto-currency services company.
Armstrong owns more than 36 million shares in the company, valued at over $12 billion. He also sold over $290 million worth of shares on the day of Coinbase’s direct listing, an alternative to a traditional IPO that has no restrictions on the sale of shares. Armstrong co-founder Fred Ehrsam owns $3.38 billion in shares.
Other cryptocurrency start-up founders have significant stakes in their companies that could be worth billions of dollars on paper. Forbes estimated that Sam Bankman-Fried, founder of crypto-currency exchange FTX, was worth $22.5 billion this year, thanks in large part to his roughly half stake in the $25 billion company.
Barry Silbert, founder and CEO of Digital Currency Group, a digital assets company, told the Financial Times that he owns just under 40% of the company, which investors recently valued at $10 billion in a private secondary share sale. Silbert says he has not sold any shares in the company.
Why are these holders the most important in cryptocurrencies?
Large cryptocurrency holders are often reluctant to talk about their buying and selling decisions for fear of hacking, tax authorities and other risks.
“I think anyone involved in cryptocurrencies is certainly reticent and, in my case, reluctant to share anything,” says Silbert. “I joke that I lost all my bitcoins in a boating accident,” he adds, referring to a meme among bitcoin investors about a supposed excuse given to tax authorities for losing a cryptocurrency portfolio.
While blockchains can facilitate the public tracking of crypto-currency flows, they also conceal the identity of their owners. Some apps, such as Nansen, attempt to match blockchain addresses to investment funds and other large holders, but they can be unreliable.
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