2 Crypto Billionaires in the World: A Lot or a Little

Back in September, Henley & Partners’ Crypto Wealth Report came out, revealing some interesting things about crypto wealth. Notably, the report mentioned that, of the 425 million people who trade in cryptocurrency, there’s a total of 22 who have become billionaires through doing so.

It’s hard to know what to make of numbers like these. Since the pandemic arrived in 2020, millions of people have started trading online for the first time, and one of the assets that’s benefited most from the influx of retail traders is bitcoin. Social media platforms stirred the coals of crypto hype to the point where it was considered normal and even savvy for an inexperienced trader to invest his savings in crypto. Especially due to the economic world in the last few years seeming so uncertain, the idea took hold that crypto was a sort of “smart risk” one could take. “Cryptocurrencies… have become pop culture touchstones”, in the words of Mintel’s Rich Shepherd.

And, with all the celebrity and influencer testimony that anyone could grow rich through crypto trading, what fraction of crypto traders had hit the billion-dollar mark by September 2023? One in 20 million. This is equivalent to saying that, in the event that every single Romanian citizen started trading crypto, one of them would make a billion dollars.

The statistics show that crypto popularity has not democratized the distribution of wealth in the world even a little bit. The recent rush to invest online has actually concentrated wealth in fewer and fewer hands. All the new retail traders “might account for a larger share of trading activity, but that’s different from ownership and wealth”, explains Steven Rosenthal of Urban-Brookings Tax Policy Center.

There are Billionaires and There are Billionaires

In 2022, Forbes wrote impressively that the 19 crypto billionaires on the globe owned assets worth a combined $140 billion. By last April, however, those same individuals couldn’t even scrape together $30 billion. Ten of those people had actually lost their billionaire status in the interim. One of the most famous was Sam Bankman-Fried, the former CEO of FTX, who was worth about $24 billion in April 2022. Just a few months later, after FTX filed for chapter 11 bankruptcy protection, his wealth had mostly disappeared.

Changpeng Zhao, the Binance CEO, saw his personal worth shrink from $96.9 billion in January last year to only $10.5 billion in April 2023. Brian Armstrong, CEO of Coinbase, saw his account balance drop all the way down from $6.6 billion to $2.2 billion between April 2022 and last April. The list goes on. One thing we can see is that lauding the double-digit number of crypto billionaires on the planet paints a very inadequate picture of the crypto-unfriendly trend that’s been reigning for the past year-and-a-half. The billionaires have lost billions in that time, and that’s also significant.

The Whales are in Charge

The media-induced hype about crypto is misleading for another reason. The impression produced is that anyone could feasibly strike it rich, and this implies there should be lots of new people getting rich all the time through crypto trading. As of the middle of this year, however, the top 100 bitcoin wallets held a massive 15% of all the bitcoin in circulation. In the case of Dogecoin, a mere 14 wallets owned 75% of all DOGE on the planet. We see proof for Rosenthal’s view that the recent surge in bitcoin trading is not making more people rich.

And check this one out: A study back in 2019 found that 74.5% of bitcoin addresses were holding less than $1 each, and that the portion of addresses holding $1 million or more was a tiny 0.07%. Perhaps most revealing of all, 97.54% of bitcoin holders owned less than one bitcoin each.

Wrapping Things Up

Crypto billionaires should keep an eye out because US regulatory bodies have not finished clamping down on crypto firms yet. When the SEC (Securities and Exchange Commission) pounced on the biggest crypto exchange in the world – Binance Holdings Ltd – in June this year, and the largest exchange in America – Coinbase Global Inc. – Zhao straightaway lost $1.4 billion of his own money and Armstrong lost $361 million.

Analysts point out that, even if interest rates are due to get lower, and even if people are interested in finding an alternative to traditional finance since the banking crisis in March, it doesn’t necessarily follow that crypto will reap big benefits – not if the SEC is going to heavily restrict anyone who wants to trade crypto or operate a crypto exchange. It remains to be seen how much the US crypto sector will be able to thrive in the stricter regulatory environment holding sway.