Bitcoin and other cryptocurrencies are not like most other investments: Bitcoin wasn’t created and spread by banks or, like stocks and bonds, by companies and the government. Instead, it was created by an anonymous person. It was quickly picked up by people who wanted to do business without using the usual banking system.
At first, almost all of the people who invested in bitcoin were individual buyers. However, that has changed with each rise.
Crypto prices went up after Donald Trump won the election on November 5, in part because Trump has positioned himself as a leader who is friendly to crypto. Investors in cryptocurrencies also hope that the new government will loosen up on governmental oversight. This hope helped drive the price of bitcoin to over $100,000 for the first time.
But this rally has been different from others, especially in how small players are getting into crypto. This is because of tailwinds that have pushed the price of bitcoin to all-time highs. Because of this, it’s harder to tell how much bitcoin individual buyers actually own.
Some research was done by MarketWatch to find out how much bitcoin small buyers own. That may sound simple, but the way regular people get into bitcoin has changed as the currency itself has changed.
Getting bitcoins straight
The public blockchain of Bitcoin keeps track of all transactions. Bit coin users can see which coins are in which wallets this way. Additionally, this has made things clearer in the bitcoin world.
There is a difference between the amount of bitcoin owned by big crypto investors (who own more than one bitcoin) and smaller retail investors (who own less than one bitcoin). This can be seen by on-chain analytics firms like CryptoQuant.
According to Julio Moreno, head of research at CryptoQuant, small investors own only 9.5% of all bitcoin. The other 90.5% is owned by big investors. This number went from 6.8% at the beginning of 2020 to a new high of 9.85% in December 2023, according to Moreno.
If you want to know who owns what amount of bitcoin, you can also look at statistics from crypto exchanges.
Coinbase’s quarterly reports showed how many transactions took place on its website and showed whether the transactions were from institutions or regular people. Volume from individual investors went up in 2024 compared to 2023, but volume from institutions went up even more, and at much higher levels.
As seen in the chart above, crypto volume started to grow in the fourth quarter of 2023 and in early 2024. According to CryptoQuant’s data, December 2023 is when individual ownership of bitcoin peaked, at near 10%.
This time frame coincided with a big change in the crypto industry — the arrival of bitcoin exchange-traded funds.
Using an ETF to buy bitcoin
In January 2023, spot bitcoin ETFs will be able to trade thanks to permission from the U.S. Securities and Exchange Commission. After a few months, trading in bitcoin ETF options also began.
“Investors can use a variety of products to put their money to work.” “For instance, you can use brokerage accounts to buy [bitcoin] ETFs on Robinhood HOOD -2.47%,” said Johann Kerbrat, head of crypto at Robinhood, to MarketWatch. “You now have a lot more customers who can get these products.”
Kerbrat pointed out that regular people can now buy bitcoin straight without having to set up a crypto wallet. In its place, they can use certain brokerage or retirement accounts that let buyers use ETFs to get exposure to crypto.
In fact, less new bitcoin wallets were created in 2024 than the year before. Even though it went up a little after the election, the rise hasn’t been as big as it has been in the past.
A lot of buyers chose to put their money into bitcoin ETFs to profit from the crypto rally, according to the data. Bank of America says that in the week after the vote on November 5, a record $6 billion poured into crypto funds.
“I think the growth of spot bitcoin ETFs was due to two main things: a better product and a lot of people using bitcoin,” wrote Bryan Armour, head of passive strategies research for Morningstar in North America, in an email. “The ETFs made it possible for first-time investors to buy bitcoin, even if they couldn’t set up a wallet or buy bitcoin on a cryptocurrency exchange.” The ETFs also gain from trading being cheaper, fees being low, and the best ways to store bitcoin being used. These benefits probably made people move their money from crypto wallets to ETFs.
Armour told MarketWatch that small investors might like buying bitcoin through an ETF because it lets them work with a bank they know, like their brokerages or the companies that offer the ETFs. It may be easy for younger, more tech-savvy buyers to set up a crypto wallet, but not everyone is. Armour said that investors may be worried about losing their wallet keys or may still not trust crypto companies after FTX went up in flames in 2022.
People are moving their crypto wallets to ETFs, which may help explain why the number of on-chain retail investors has been a little lower since these crypto ETFs were first introduced earlier this year.
People who want to get exposure to bitcoin choose to do so through an institution by buying a bitcoin ETF. That makes it harder to keep track of how much bitcoin individual investors own compared to institutional investors. This adds a level of complexity that wasn’t there before 2024.
Because ETF providers don’t have to say who owns their bitcoin ETFs, it’s not always clear how much is owned by regular investors.
“It makes things less clear,” Garrett DeSimone, head of quantitative research at OptionsMetrics, told MarketWatch. “Because you don’t have to do business on ledger to use bitcoin or other cryptocurrencies.”
Vanda Research can track how small investors interact with the market. They were able to see some small investors putting money into bitcoin and other digital exchange-traded funds (ETFs). Its data shows that over the past month, self-directed small buyers bought crypto ETFs worth a net of about $1 billion. That made up about 11 to 12 percent of all the money that came into crypto ETFs.
Vanda also used its data to try to guess what percentage of bitcoin ETF shares were owned by regular people, but it wasn’t always an easy task. Vanda says that retail users with self-directed brokerage accounts own about 24.8% of the VanEck Bitcoin Trust HODL -3.59% and 16.5% of Fidelity’s Wise Origin Bitcoin Fund FBTC -3.74%. This helped make things clearer, but regular people can also get into bitcoin ETFs through investment advisors or controlled brokerage accounts. Besides that, ownership shares may be different for each ETF.
