What would happen? If in the future ETF holders become the 99% and 1% are self-custodians,
In a scenario where almost nobody owns bitcoin and things have gotten this centralized, we can say with confidence Bitcoin is already dead so who cares what happens!
then it will be on their interest to push this agenda. What if they have enough % of developers under their payroll, and enough people supporting it because they lost their money, and start pushing for a hard fork? What would be the game theory outcome scenarios at play here?
They'll need to get high percentage of the hashrate on their payroll and a high percentage of the community that includes full nodes, bitcoin users and the economy built on top of bitcoin.
Immutability is one of the fundamental principles of Bitcoin, people aren't gonna give it up that easily.
What's the threshold for Bitcoin to start becoming "that scenario"? How much of the total circulating supply must be in the vaults of a cabal of banksters/asset managers before we could say that Bitcoin is failing?
I have asked the same question before and made a
topic about it, but it never had a direct answer, with most of the replies were dodging the issue.
As of today...
Yellow light: I would start being concerned if one entity held 431k BTC (2.2%).
Red light: Any entity or cabal that could liquidate 1,600,000 BTC (~8% of the circulating supply) at the drop of a hat makes me think BTC is not the market to be in.
Get off the road: Any one entity that owns 6,860,500 BTC (35.01%) makes me consider BTC to be functionally centralized and a complete failure.
Reasoning:
Yellow light: Practically speaking, when should we start being concerned? I would say if any one entity owns enough BTC to fill the current
open interest, that would be where I'd start being concerned. Right now that's 431,000 BTC.
Red light: When is Bitcoin potentially failing its vision? I would argue that any time any one entity owns enough BTC to cover the highest daily traded volume over the last month plus all current open interest (OI is currently around $18.3b), that is concerning. To me that seems like they could then completely collapse the market at any time. Based on where things stand right now with OI at $18.3b and the highest daily
trading volume in the last month being around $50b, any single non-regulated or government entity or cabal owning 1,600,000 BTC or more makes this an extremely serious concern and makes me question if Bitcoin is failing. That's around 8% of circulating supply.
I would be slightly less concerned if ownership was in the hands of entities that can only survive and thrive if BTC keeps running strong.
I will say non-governmental regulated entities that are unable to practically divest their full supply of BTC at will would be less concerning.
Government actors possessing 431k BTC or more seems contrary to the purpose of BTC. I'm torn on whether government possession of BTC that is slated for sale as part of forfeiture for illegal cabals should be included or not, but lean toward "probably".
When we're done: I think the obvious starting point is 50.001% circulating supply is clearly too much to be in the hands of any one entity, that would give practical market control, since selling that much quickly would completely crash the market, liquidate speculators, etc. and refusing to sell that much freezes the majority of the market based on the decisions of one entity. That is completely centralized at that point.
If we take the assumption that 30% of BTC is functionally lost, then we'd have to bring that number down to 35.001% of circulating supply could theoretically have practical control of the market.