Distribution of bitcoin wealth by owner

[calian]

Large holders can't diversify. If they put a few % in an altcoin, they can't on a risk-weighted basis catch up to their 9x% even if it grows slower. If they diversify too much percent, they are not being risk-adverse.

Big capital is always blind to smaller opportunities (what I figuratively referred to as "dumb"), because it has to be. This is why won't see Richard Branson investing seriously in Bitcoin.

Well was this true or false? He apparently did invest though how seriously is open to debate.

[AnonyMint]

I think I interjected a chart showing how transactions are not increasing as fast as price and market cap, thus pointing towards concentration.

Please explain. I do not see why that is necessarily so.

Edit: also I have an error above. Replace market CAP with market PRICE. Then the following makes more sense.

Here is the chart again.

We can suspect much of the increase may be speculative trading transactions, due to higher price. Although we can't be sure with the small float, on the other hand if one was buying in size they might want to obscure it with many smaller transactions.

I suppose it was recently I read that SatoshiDice was 57% of all transactions.

Although we can't establish a mathematical relationship that says transactions much increase as fast as price to indicate a lowering of concentration, I was instead thinking that when transitioning from a speculative investment to currency, we would expect to see market PRICE growing slower than transactions. Because a stable price relative to commerce is key feature of a currency (especially since Bitcoin doesn't have any other real feature, just delusion* about features it really doesn't have).

So I believe you are correct to call me out. And the statement I would make instead is that it appears that Bitcoin is still in speculative mode and not yet transitioning to currency mode.

And again, the link above contains my (and other respected Austrian economists') thesis that it is impossible for a coin that is primary owned for speculation to shift to a currency without a crash first in price.

I would now like to say this is going to happen to any crypto-currency, because there is no way to grow interest in such without a speculative investment.

Notwithstanding that, I believe it is possible to design an altcoin which has less maniac* speculation and more significant currency adoption along the way, leading to a much less significant collapse in price when it stabilizes to a currency. I think this important, because if Bitcoin reaches the level of bubble I expect, the crash could wipe out so many people that electronic currency might be handed by society to the government to regulate and own, i.e. fiat.

* Bitcoiners, "only 21 million coins, it is going to $1 million, never sell any coin, we will be the new wealthy and rule the world". Etc..

That mania means we will get the reverse mania emotions on the bubble pop. I would prefer to have a more rational speculative rise, based on more sound technical design and a more sound reasons for being a currency. Specially Bitcoin has absolutely no anonymous future. It has no future whatsoever funded by transaction fees. Etc.. I have covered this in detail in recent posts. Just read my archive.

[Zangelbert Bingledack]

...
P.S. it ironic how Europeans comfort themselves with notions of how their governments are less rapacious. Hilter's government was also so caring in the beginning while it was printing money for universal health care. You all never learn your lesson about collectivism and always come back for sloppy seconds, thirds, fourths, ...

http://en.wikipedia.org/wiki/Godwin's_law

He's right, though. Bringing up Nazi Germany neither automatically validates nor automatically invalidates an argument.

[AnonyMint]

...
P.S. it ironic how Europeans comfort themselves with notions of how their governments are less rapacious. Hilter's government was also so caring in the beginning while it was printing money for universal health care. You all never learn your lesson about collectivism and always come back for sloppy seconds, thirds, fourths, ...

http://en.wikipedia.org/wiki/Godwin's_law

He's right, though. Bringing up Nazi Germany neither automatically validates nor automatically invalidates an argument.

What did you say? Using the examples of printing money and the (every time) failure outcomes is not a valid argument?  

(Risto I didn't take the thread off on the tangent of LawsThatAreTriviallyNotLaws)

Edit: I have to remember that most people blame everything on him being a megalomaniac, as if an entire country could be controlled by a megalomaniac without some economic incentive driving them to turn to him. It was the Socialists in the Wiemar Republic that destroyed the economy of Germany so much, that the society was ripe for a megalomaniac to offer them free money and a perfect society. Oh then I need to remember that most people blame that rise of Socialists and economic hardship on the war reparations. But why was there war in Europe at that time? Because of economic failure of Socialism with the death of cottage industry due to mass production factories as the Second Industrial Revolution kicked in.

[Rassah]

A Harvard Business School case paper on economic history of 20th century Germany claims that Wiemar Republic was printing money like crazy, because the guy in charge of the central bank had too little power, and too many people and organizations pushing him into doing it. He would essentially be assassinated if he refused to inflate. The massive inflation that resulted from that weak government was what got people to fote for an extremely strong government, in hopes that it would resist influence and prevent inflation. That jews owned many banks and ended up making out like bandits simply from the massive inflation itself (not stealing, but in the same way how a mortgage owner would make out like a bandit on a 4% mortgage loan if inflation shot up to %50), kinda made the jews an extremely disliked group, too.
Moral of the story that Germany learns was: Inflation causes Hitlers. It's why Germany, and the European Central Bank, are so extremely resistant to inflation, and are willing to let countries collapse or do forced seisures, than inflate the Euro.

[wachtwoord]

A Harvard Business School case paper on economic history of 20th century Germany claims that Wiemar Republic was printing money like crazy, because the guy in charge of the central bank had too little power, and too many people and organizations pushing him into doing it. He would essentially be assassinated if he refused to inflate. The massive inflation that resulted from that weak government was what got people to fote for an extremely strong government, in hopes that it would resist influence and prevent inflation. That jews owned many banks and ended up making out like bandits simply from the massive inflation itself (not stealing, but in the same way how a mortgage owner would make out like a bandit on a 4% mortgage loan if inflation shot up to %50), kinda made the jews an extremely disliked group, too.
Moral of the story that Germany learns was: Inflation causes Hitlers. It's why Germany, and the European Central Bank, are so extremely resistant to inflation, and are willing to let countries collapse or do forced seisures, than inflate the Euro.

Erm, they have been inflating like crazy in 2012 at least. Not sure about 2013, do you have any data?

I think all central banks love inflation. It's their foundation.

[Rassah]

Erm, they have been inflating like crazy in 2012 at least. Not sure about 2013, do you have any data?

I think all central banks love inflation. It's their foundation.

Lately, yeah. They probably had no choice, but they were fighting it like crazy. If you look at German Deutchmarks, and then the Euro years before the 2008 crazness, you'll see that they are fairly flat.

[wachtwoord]

Erm, they have been inflating like crazy in 2012 at least. Not sure about 2013, do you have any data?

I think all central banks love inflation. It's their foundation.

Lately, yeah. They probably had no choice, but they were fighting it like crazy. If you look at German Deutchmarks, and then the Euro years before the 2008 crazness, you'll see that they are fairly flat.

There is always a choice. No excuses.

[Rampion]

Moral of the story that Germany learns was: Inflation causes Hitlers. It's why Germany, and the European Central Bank, are so extremely resistant to inflation, and are willing to let countries collapse or do forced seisures, than inflate the Euro.

Congrats, the bolded part is the most shallow oversimplification I've ever read in this forum.

FYI: Germany just had a period of huge inflation (because of over-liquidity) at the beginning of the '90s because of the reunification and the assimilation at a fixed rate of the DDR Ostmark.

And BTW: Weimars hyperinflation has nothing to do with the the current bundesbank/ecb policy, that's just a stupid and unfounded meme - on the contrary the German experience during the reunification has everything to do with it - current German policies where in fact implemented during and shortly after that reunification.

[macsga]

So apparently 80% realize and up to 20% are willing to panic.

So this is how the concentration of ownership in Bitcoin possibly increases, as the weak hands pass it to the strong hands.

Which is *exactly* what happened tonight...

[Rampion]

So apparently 80% realize and up to 20% are willing to panic.

So this is how the concentration of ownership in Bitcoin possibly increases, as the weak hands pass it to the strong hands.

If everybody could follow the simple advice "invest just what you can afford to lose" we wouldn't have such an insane amount of weak hands and panickers. BTC 's have grown so much that by investing just a modest amount everybody who has stayed in for 12-24 months is looking at huge profits, probably life changing for many.

Making a long story short: investing just what you can afford to lose and holding like a mofo until you hit your "profit taking" targets (or "rake" target as risto call it) has never failed on anybody. Never. Why people should throw money they cannot afford to lose in an experimental beta software which is extremely fragile and volatile, that I cannot understand. I guess the answer is "greed and stupidity"

[BitChick]

So apparently 80% realize and up to 20% are willing to panic.

So this is how the concentration of ownership in Bitcoin possibly increases, as the weak hands pass it to the strong hands.

If everybody could follow the simple advice "invest just what you can afford to lose" we wouldn't have such an insane amount of weak hands and panickers. BTC 's have grown so much that by investing just a modest amount everybody who has stayed in for 12-24 months is looking at huge profits, probably life changing for many.

Making a long story short: investing just what you can afford to lose and holding like a mofo until you hit your "profit taking" targets (or "rake" target as risto call it) has never failed on anybody. Never. Why people should throw money they cannot afford to lose in an experimental beta software which is extremely fragile and volatile, that I cannot understand. I guess the answer is "greed and stupidity"

I think that even people that are investing what they can afford to lose panic too.  People hate feeling like they are losing money, even if it is a very small percentage of their portfolio.  I have a friend that has way more money than I do, with investment properties, plenty of money in the bank etc.  She did not get in soon enough before the last rise.  I advised her to buy right at $200.  She took her time and then finally bought at around $500 up to $700 then stopped, regretting of course not buying sooner.  She can afford to lose the amount she invested but she is totally panicking and calling us and wanting to know what to do.  Our advice was "Hold or buy more because they are cheap now."  I am not sure what she decided yet.  I would not be shocked if she sold off the coins and decided that Bitcoin is not for her.  I explained that the price would most likely drop and that she could be "underwater" for a while and that was just normal stuff with Bitcoin and the true winners just buy in and hold for the long haul, the "long haul" being only a year or two! That does not seem so hard to me but I guess I am more patient then some?

Sorry to rant here but I think that most people are just skittish to quick losses.  Some of us have learned, from experience, not to sweat these drops much and just wait for a little while.

[macsga]

Sad thing is that most people don't understand the basics of BTC. This is not due to one's IQ mark, rather than lack of interest in reading economics and financial rules. Most people simple have lack of knowledge. I had never previously involved with macroeconomics or financial assets. To be honest; I never thought that these kind of stuff had ANYTHING to do with science. I even was in the middle of great debates with "financial analysts", "Marketing & Treasurer managers" and so forth... I called them crooks. 

Economy should be simple math: 1+1=2 that's about it.

Economy is based on "money". Money in Greek is called "Xρήμα" (Chrema) from the word "Xρήζω" (I use). So this is the first thing to know when you want to know what money is. It's called like that because it's for USE. Stashing is almost as useful as burning or burying money under the earth. Circulation is what matters most. Circulation has its disadvantages though. One of the first inflations was through the "worn out" paper money which the banks should recirculate. Greed is embedded to the human DNA. Whenever there's money and a man (or woman) involved there will be inflation; aka:create money out of thin air... or most commonly said: THEFT.

Here comes bitcoin. Bitcoin is nothing of all these. No inflation. No middle men involved. No creation of money out of thin air. No THEFT! Anyone with basic knowledge of the economic system knows that bitcoin is the next big thing. The old one is dead and buried. People tend to compare it with the early year's internet. This may be true... I really don't know. But I know, if we want a better society, we need a better way to pay and get paid. We need bitcoin (or something like that).

Buy and hold!

[FenixRD]

So apparently 80% realize and up to 20% are willing to panic.

So this is how the concentration of ownership in Bitcoin possibly increases, as the weak hands pass it to the strong hands.

If everybody could follow the simple advice "invest just what you can afford to lose" we wouldn't have such an insane amount of weak hands and panickers. BTC 's have grown so much that by investing just a modest amount everybody who has stayed in for 12-24 months is looking at huge profits, probably life changing for many.

Making a long story short: investing just what you can afford to lose and holding like a mofo until you hit your "profit taking" targets (or "rake" target as risto call it) has never failed on anybody. Never. Why people should throw money they cannot afford to lose in an experimental beta software which is extremely fragile and volatile, that I cannot understand. I guess the answer is "greed and stupidity"

I think that even people that are investing what they can afford to lose panic too.  People hate feeling like they are losing money, even if it is a very small percentage of their portfolio.  I have a friend that has way more money than I do, with investment properties, plenty of money in the bank etc.  She did not get in soon enough before the last rise.  I advised her to buy right at $200.  She took her time and then finally bought at around $500 up to $700 then stopped, regretting of course not buying sooner.  She can afford to lose the amount she invested but she is totally panicking and calling us and wanting to know what to do.  Our advice was "Hold or buy more because they are cheap now."  I am not sure what she decided yet.  I would not be shocked if she sold off the coins and decided that Bitcoin is not for her.  I explained that the price would most likely drop and that she could be "underwater" for a while and that was just normal stuff with Bitcoin and the true winners just buy in and hold for the long haul, the "long haul" being only a year or two! That does not seem so hard to me but I guess I am more patient then some?

Sorry to rant here but I think that most people are just skittish to quick losses.  Some of us have learned, from experience, not to sweat these drops much and just wait for a little while.

Then she just does not understand that nothing goes ONLY up, and that BTC is extremely volatile and a gamble in itself. Probably she shouldn't be investing in something so experimental and risky.

Advice I gave to my friends that invested this summer? Just consider this money as completely lost. You are choosing to participate in an experiment that might very well fail, just do not get emotional and stick to your plan, which should contemplate a total loss.

Investing in BTC is like flipping a coin. If you cannot stand seeing the coin flipping in the air, then leave BTC alone.

That's what I tell my friends too, especially since they're having me manage their coins with my own in one big fund (we split the profit I make 50/50)... but yet, to-date, knock on wood, the whole portfolio is up 144% since October 15th (if you measure in bitcoins -- down 12% after the crash if you measure in equivalent fiat). Call me crazy, but I bias my trades with the underlying belief that Bitcoin trends upwards vs. USD as you expand the time interval... Besides, it only needs to stabilize above about $840 USD to break even on that metric (disregarding any future movement captures I attempt). I'm pretty sure it can hit that.

[SlipperySlope]

3. Dec 2013

#People	#Bitcoins	#TotalBitcoins
47	BTC10k+	3.5M
880	BTC1k-10k	2.6M
10k	BTC100-1k	3.0M
63k	BTC10-100	1.8M
210k	BTC1-10	0.6M
350k	BTC0.1-1	0.1M
350k	BTC0.01-0.1	0.0M
210k	BTC0.001-0.01	0.0M

Total: 11.6M bitcoins (0.5M bitcoins assumed lost)

1,200,000 people own bitcoins that are valued at more than $1 (BTC0.001 or more)
280,000 people own bitcoins that are valued at more than $1,000 (BTC1 or more), up from 120,000 last month
930 people own bitcoin that are valued at more than $1 million (BTC1,000 or more)
1 person owns bitcoins that are valued at more than $1 billion (Satoshi, estimated to be BTC980,000)

Changes from previous month:
- Bitcoin total number adjusted to account for increase in money supply
- Thoroughly re-engineered the number of bitcoin users from original data of the userbases of several services + blockchain usage. This shows that the last month estimate was probably too small, and perhaps 50% of the growth in number of users can be attributed to correction of a previous underestimate.
- Corrected the highest bracket a little bit (BTC0.6M ) upwards because it was over-corrected downwards last time. Number of holders in this category went down a little but we have better estimate of the holdings. As this is a base case model, we do not assume large, completely anonymous entities without at least circumstantial evidence of their holdings.
- Number of people in each bracket behaves according to binomial distribution as found in another data with the parameters: total=1.2 million users, highest bracket=fixed, #of_coins=fixed.

As a result:
- Bracket 1,000-10,000 saw the greatest loss -20%, bracket 100-1,000 lost 10%. Sub-BTC10 holdings gained a lot.

I have been tracking my bitcoin holding total on http://btc.ondn.net/search for a couple of weeks and I observe that my rank has been moving lower, meaning that there are likely fewer holders with more than BTC me than there were two weeks ago. I think that my rank has improved because I am holding beyond the 100-1000x price increase that tempted other early adopters to sell. Notably my rank improved the most during the crash/correction of December 4-6.

I expect this trend to continue, and will look for it in your updates.

[psyclon]

satashi and his friends should give their portion away to publics

second that. Once the hoarding chinese and fund managers in new york realize that a few persons hold as much as one third of all the coins, they will surely not trust it anymore.

[Zangelbert Bingledack]

I have been tracking my bitcoin holding total on http://btc.ondn.net/search for a couple of weeks and I observe that my rank has been moving lower, meaning that there are likely fewer holders with more than BTC me than there were two weeks ago. I think that my rank has improved because I am holding beyond the 100-1000x price increase that tempted other early adopters to sell. Notably my rank improved the most during the crash/correction of December 4-6.

I expect this trend to continue, and will look for it in your updates.

Anyone who follows the SSS should move up in the ranks versus those who don't (except lucky ones who forget or are unusually bold, but those people have to be pretty rare).

[rpietila]

satashi and his friends should give their portion away to publics

second that. Once the hoarding chinese and fund managers in new york realize that a few persons hold as much as one third of all the coins, they will surely not trust it anymore.

It depends who you need to trust. In the current system we are forced to "trust" in the banks, which in turn are free to abuse that "trust" in any way they want at taxpayer's expense. Ever since Bitcoin started, Satoshi or anyone has had very little influence on the network's operation. Everybody has power in direct proportion to his willingness to spend the coins that he has. So Satoshi has no power unless he spends his coins, also you have no power if you don't have many or any coins.

[molecular]

satashi and his friends should give their portion away to publics

second that. Once the hoarding chinese and fund managers in new york realize that a few persons hold as much as one third of all the coins, they will surely not trust it anymore.

It depends who you need to trust. In the current system we are forced to "trust" in the banks, which in turn are free to abuse that "trust" in any way they want at taxpayer's expense. Ever since Bitcoin started, Satoshi or anyone has had very little influence on the network's operation. Everybody has power in direct proportion to his willingness to spend the coins that he has. So Satoshi has no power unless he spends his coins, also you have no power if you don't have many or any coins.

The kind of power Satoshi has is not comparable to the kind of power a central bank has. Satoshis power is used up when he spends coins. Central banks have real superpower, it doesn't diminish by use.

Satoshi and friends should give their coins to anyone they choose, not be "forced" to give it to the "public" (wtf), which is not even possible.

It doesn't matter if some huge fund managers decide to get rid of their coins. Bitcoin is money, it changes hands. Someone will spend these early coins at some point (or not, who knows). Satoshi might buy himself a small continent or something and buy services from the population. So what? It's all voluntary, right?

[Rassah]

Uh-oh, you're in the news! http://www.businessinsider.com/927-people-own-half-of-the-bitcoins-2013-12