The rise of Bitcoin (BTC) and other cryptocurrencies in recent years has created a new class of wealthy individuals, many of whom had made their fortunes by buying into the market early and adopting ‘HODLing‘ strategies. However, the past year has seen the market experience a sharp downturn, with the value of Bitcoin falling significantly, resulting in a devastating impact on the wealth of many holders.
In particular, according to data acquired and calculated by Finbold, as of January 2, 2023, the number of Bitcoin millionaire addresses stood at 28,007, representing a drop of about 71.73% or 71,085 addresses from January 2, 2022. At the start of last year, the number of millionaire addresses stood at 99,092.
Elsewhere, in January 2022, the number of addresses holding $1 million worth of Bitcoin stood at 90,902 to record, a year-over-year (YoY) drop of 73.33% to 24,208 in the first month of 2023. At the same time, addresses with at least $10 million worth of Bitcoin stood at 8,190 in January 2022 before plunging by 62.5% to 3,799 in January 2023. Notably, most Bitcoin addresses hold between $100 and $999 worth of BTC at 13.47 million in January 2023.
Bear market wipes out Bitcoin millionaires
As Bitcoin’s price continues to fall, many investors have seen their holdings significantly devalue. Therefore, the drop in millionaire addresses highlights how far the crypto market has fallen from the 2021 bull run. The slump correlates with the asset’s volatility which has been a highlight of 2022, plagued by a combination of several factors such as regulatory scrutiny, turbulent markets, macroeconomic factors, and fraud-related incidents like the FTX crypto exchange crash and the Terra (LUNA) ecosystem crash.
Overall, the condition has resulted in many investors and speculators becoming wary of the market, leading to decreased demand for cryptocurrencies. This has had a cascading effect on the market, with the value of cryptocurrencies showing minimal signs of rallying.
It is worth noting that the declining number of Bitcoin millionaires is not solely an impact of the plunging prices. With Bitcoin undergoing a free fall in recent weeks, the likelihood of holders liquating their assets increased to avoid further losses. Institutions have also jumped on the liquidation bandwagon, with American business intelligence firm MicroStrategy selling over 700 Bitcoin. The development was considered a surprise, considering the firm had maintained never to sell the asset. However, the company cited tax reasons for the sale.
The crypto playing field differences
Interestingly, the emergence of Bitcoin millionaires has also questioned the role of cryptocurrencies in leveling the financial playing field. Although the anonymous nature of digital assets makes it challenging to identify the exact millionaire holders, some wealthy people are known to control crypto-related businesses. Notably, as millionaires see a drop in wealth, they are in a considerably better financial position than small net-worth traders. In this case, some smallholders betted on the sector with their life savings.
In this line, amid the bear market, such businesses have been forced to scale down operations by initiating measures like employee layoffs and rolling out hiring freezes. Consequently, executives have remained unscathed as the employees lose their jobs and traders see their investments get wiped off.
Furthermore, the divide between the minority millionaire investors and the majority ordinary holder has partly contributed to a push for enacting regulations. Overall, it is highly speculated that the rollout of rules will impact the price of Bitcoin and, consequently, the net worth of holders.
Bitcoin’s next move
Due to the increasing uncertainty around the stability of global markets, commentators agree that the price of risk assets like Bitcoin could continue to suffer over a longer time frame. Despite the current crypto winter, there is still hope for those who remain in the market.
Some analysts and investors are optimistic about the future of cryptocurrency, betting on the value of Bitcoin to rise backed by factors like a slowdown in Federal Reserve monetary policy, falling inflation, and a possible rally from the upcoming halving event slated for 2024.
In addition, the increasing institutionalization of the market and a growing number of sectors like decentralized finance (DeFi) projects could drive further growth in the future. It remains to be seen whether the crypto winter will end soon or continue to plague the market for some time.
In general, crypto fanatics maintain that the bear market is a regular occurrence and a majority believe the ongoing impacts are temporary. However, for long-term believers in Bitcoin, the falling prices have offered an opportunity to accumulate the asset, hoping to benefit from a possible rally.