Tuesday, January 7, 2014

Citibank on Bitcoin

In a Monday note, Steven Englander at Citi wrote:
With Bitcoin again over USD1000 on reports over the weekend of interest in Bitcoin by US hedge funds, real estate firms and online gamers, it seems churlish to be skeptical on how Bitcoin will evolve. Nonetheless, we are less excited about Bitcoin as a store of value and alternative to fiat currencies than about its potential use in facilitating transaction and improving payments efficiency. [...] Net, net, we like small-‘b’ generic bitcoin as a payments technology more than big-‘B’ brand-name Bitcoin as a store of value[...]
Best estimates are that there are about one million holders of Bitcoin; 47 individuals hold about 30 percent, another 900 hold a further 20 percent, the next 10,000 about 25% and another million about 20%, with 5% being lost. So 1/10th of one percent represent about half the holdings of Bitcoin and 1 percent close to 80 percent. The concentration of Litecoin ownership is similar.
Most of the big wallets have been in place from early on, so sitting back and watching your capital grow has been a very successful strategy. The distribution of Bitcoin holdings looks much like the distribution of wealth in North Korea and makes China’s and even the US’ wealth distribution look like that of a workers’ paradise. There are estimates of a Gini coefficient of 0.88 for Bitcoin, but if anything the estimates are low if big holders own multiple wallets and the overall concentration of Bitcoin wealth is greater than in the sample used to estimate the coefficients . 

1 comment:

  1. C'mon Citi, do your research. Caps B Bitcoin is the network, lowercase b bitcoin is the currency. https://en.wikipedia.org/wiki/Bitcoin#Wording