The distribution of Bitcoin supply remains a noteworthy topic for capital flow analysis and observing investor behaviors. In this piece, we analyze BTC supply by wallet size and explore coin dispersion over time. It is of great interest for analyzing capital flow and observing cohort behaviors of the holder base. Critics often misquote large wallets as evidence of heavy supply concentration by a few whales. Our original article demonstrates that BTC ownership disperses over time and is less concentrated than reported. Our entity-adjustment clustering algorithms improve accuracy and precision, grouping addresses with a single entity owner and isolating large entities like exchanges or ETF products. This enhances our signal-to-noise ratio for data-driven decision-making.

The article aims to provide a follow-up on the growth and contraction of supply held by defined entity cohorts, and remarks on the current distribution of the circulating supply.

As a starting point, network entities can be categorized into sea-creature cohorts based on their Bitcoin holdings:

• Shrimps (<1 BTC)

• Crab (1-10 BTC)

• Octopus (10-50 BTC)

• Fish (50-100 BTC)

• Dolphin (100-500 BTC)

• Shark (500-1,000 BTC)

• Whale (1,000-5,000 BTC)

• Humpback (>5,000 BTC)

• Exchanges and Miners

The following chart presents an overview of the current state of relative ownership of the Bitcoin supply after approximately 2 years. Upon assessing the changes in each cohort since February 2021, it is observed that smaller entities (Shrimps to Octopus) have experienced relative growth, while Whales, Miners, and Exchanges have seen the largest contractions in their supply share.

We can also analyze changes in the distribution of supply using a new metric called the Yearly Absorption Rate. This tool measures the balance change relative to the volume of newly minted coins over the past year, providing insights into the level of expansion or contraction a cohort has experienced in relation to new supply entering the market.

For example:

• An Absorption Rate of 120% indicates that a cohort's balance grew by 1.2 times the new issuance.

• An Absorption Rate of 0% means that a cohort's balance remained unchanged over the past year.

• An Absorption Rate of -80% implies that a cohort's balance declined by 0.8 times the new issuance.

Miners:

Let's start with miners, who produce Bitcoin and own all the coins in circulation at the beginning. People often say that big and rich miners can get too many coins and keep them, which makes it hard for others to get them. But this isn't entirely true, because mining Bitcoin costs a lot of money and is very competitive.

Out of all the problems people have with Bitcoin, this one is probably the easiest to prove wrong. If we look at the total number of coins owned by miners, we can see that it has gone down from 100% to 9.5% over time. However, this is an overestimate because it includes lost coins. If we take those out, we can see that miners only own 3.77% of all the coins in circulation today. Miners spend some of their coins every year, and this can be seen in the Yearly Absorption Rates, where miners spend 1.05 to 1.1 coins for every coin they mine.

Recently, there have been times when miners actually spent more coins than they mined. This is because there are more mining companies that are publicly traded and can get money from investors to pay for their expenses.

Shrimps, Crabs, Octopus:

To check how much ordinary people are involved in buying Bitcoin, we look at those who hold less than 10 Bitcoin, called the Shrimp to Crab group. This group includes mostly regular people, but some long-term investors with strategies to hold Bitcoin for years are also part of this group.

Looking at how much Bitcoin is owned by this group and how much it changes each month, we see two important things:

1. The amount of Bitcoin owned by this group has mostly gone up each month, with only 37 days when it went down.

2. There were two big events that caused this group to buy a lot more Bitcoin: the LUNA and FTX problems, which caused an increase of 56,000 and 92,000 Bitcoin per month, respectively.

Currently, this group is buying about 24,000 Bitcoin per month, which is higher than usual. The Crab group, which includes people who own between 10 and 1,000 Bitcoin, is also buying more Bitcoin than usual.

Right now, the Shrimp group owns 6.6% of all the Bitcoin in circulation (up from 4.86% a year ago) and the Crab group owns 10.5% (up from 8.7% a year ago).

Overall, both groups have been buying more Bitcoin than is being created each year, which means they are taking more of the existing Bitcoin supply.

Fish, Dolphins, Sharks:

This group of people and entities includes those who own between 10 and 1,000 Bitcoin and have a lot of money. They may have gotten their Bitcoin early on when it was cheaper or bought a lot of it at once. They may also be trading desks, institutions, or wealthy individuals who use different methods to store their Bitcoin. These people and entities often split their Bitcoin into smaller parts to avoid being noticed by those who monitor large transactions.

From the beginning of Bitcoin until late 2017, this group of people and entities were very active in buying up new Bitcoin. However, after the big price surge in late 2017, they became more reactive to changes in the market and started trading more often. Their overall balance has remained the same but has been affected by changes in the market.

Recently, this group of people and entities has been seeing more growth in their Bitcoin holdings. This could be due to the lower price of Bitcoin or concerns about the safety of their Bitcoin being held by others.

Looking at the data, we can see three different phases in how this group of people and entities have interacted with the market:

1. From the beginning of Bitcoin until late 2017, they were actively buying up Bitcoin.

2. From late 2017 to early 2021, they were more reactive to changes in the market and were not as dominant in circulating supply.

3. Since early 2021, they have been experiencing more growth in their Bitcoin holdings, with a split of 75:25 between the smaller and larger entities, respectively.

Whales:

We're now looking at entities that have more than 1,000 BTC in their addresses (excluding coins on exchanges). These entities, called Whales, held about 50% of the total Bitcoin supply (around 7.8 million BTC) until the second halving in mid-2016. This was possible because the initial block rewards were high and the Bitcoin price was low.

However, the dominance of Whales in the total supply held has consistently declined over time, from 62.7% in 2012 to 34.4% today. In 2017, during the bull market, Whale behavior changed as exchanges and mature markets developed, and their balances started to decline significantly. By the end of the 2018 bear market, Whale entities held between 6.4 million and 6.6 million BTC, which is a 16% decline since their peak holdings in H1-2016. Currently, Whales hold about 6.64 million BTC, equivalent to 34.4% of circulating supply.

Through the Yearly Absorption Rate, two primary periods stand out for this cohort: the 2017 bull run and the 2020-21 bull run. In the 2017 bull run, there was a net decline in Whale balances likely due to high volatility, large inflows of new demand, and liquid markets to distribute into. The 2020-21 bull run saw the first real wave of institutional and corporate capital entering the space, and the expansion of ETP products such as GBTC and other ETFs, which resulted in the first significant expansion of balance held by Whale entities since 2016.

The chart below shows the estimated number of entities (x-axis in log scale), whilst the right shows the relative proportion of supply held (x-axis in linear scale).

This information shows us that the number of entities owning cryptocurrency follows a Pareto distribution. Over 32 million smaller entities, called Shrimp, make up only 6.5% of the total supply, while about 1640 larger entities, called Whales, hold around 28.3% of the supply.

To get a sense of the scale for each group, we can look at the average balance per entity (based on a value of $22.4k):

• Shrimp have an average of ~0.039 BTC ($873.6) and there are 32 million of them.

• Crabs have an average of ~2.73 BTC ($61.15k) and there are 740,000 of them.

• Octopuses have an average of ~21.75 BTC ($487.2k) and there are 80,000 of them.

• Fish have an average of ~74.17 BTC ($1.66M) and there are 12,000 of them.

• Dolphins have an average of ~214 BTC ($4.79M) and there are 10,000 of them.

• Sharks have an average of ~763.63 BTC ($17.1M) and there are 2,200 of them.

• Whales have an average of ~1855.17 BTC ($41.6M) and there are 1,450 of them.

• Humpbacks have an average of ~14,473 BTC ($324M) and there are 190 of them.