As a researcher with a background in economics and experience in following the cryptocurrency market closely, I share Willy Woo’s concerns about the potential impact of a recession on retail Bitcoin investors. While it is important to note that historical events do not always repeat themselves exactly, the comparison to the Great Depression and the government’s seizure of gold raises valid questions.
On April 29, Willy Woo, a well-versed on-chain analyst, voiced his apprehensions on X about the potential negative impact on small-scale Bitcoin investors should the global economy, particularly the US, experience a downturn and enter a recession.
According to Woo, drawing from historical occurrences, significant Bitcoin investors, often referred to as “whales,” have the advantage of controlling their own private keys and thus may be able to ride out market volatility. In contrast, smaller retail investors or everyday BTC holders might encounter distinct challenges during turbulent times in the cryptocurrency market.
Who Will Be Safe If The United States Government Began Confiscating Bitcoin?
An analyst examines the present market situation in the context of the Great Depression of the 1930s. It’s important to note that during this historic economic downturn, the US government took the unprecedented step of confiscating gold from the general public to bolster its own reserves.
As a crypto investor, I ponder over the possibility that Bitcoin may experience a market correction similar to what happened with Terra’s Luna and UST. Such an event could bring about even more significant ramifications for individual investors, given Bitcoin’s larger market capitalization and broader impact on the entire cryptocurrency ecosystem.
As a crypto investor, I can tell you that the success or failure of government interventions in the Bitcoin market hinges significantly on one essential aspect: Bitcoin storage. According to Woo’s analysis, an astounding 87% of Bitcoins are kept in personal wallets. For instance, using wallets like Samourai Wallet gives individuals complete control over their private keys. This means we can sign transactions, thereby confirming our ownership of the coins.
As a crypto investor, I can tell you that approximately 1% of the total Bitcoin supply is currently held by issuers of spot Bitcoin exchange-traded funds (ETFs), such as Fidelity. These ETF issuers, particularly those based in the US, are actively purchasing Bitcoin from various sources to meet the surging demand from investors, including institutions. They acquire Bitcoin through channels like exchanges and over-the-counter markets.
Based on data from Lookonchain, approximately 834,000 Bitcoins were held by users of Bitcoin spot ETFs as of April 26, just three months following their launch.
While approximately 88% of all Bitcoin is held by individual owners with their private keys, around 12% resides on cryptocurrency exchanges such as Binance, Kraken, and Coinbase. Many of these exchange-held Bitcoins are owned by investors or traders who frequently participate in the market. Through these centralized platforms, Bitcoin holders can convert their coins into alternative cryptocurrencies like Cardano, fiat currencies such as US Dollars, or even stablecoins for transactional purposes.
United States Inflation Rising, GDP Data Soft: Recession Incoming?
During normal market conditions, the majority of Bitcoins are stored in non-custodial wallets by individuals, with large holders or “whales” being the primary users of this method. In contrast, over 12% of retail investors keep their coins in centralized exchanges. This difference becomes significant during economic instability.
From my perspective as an analyst, it’s important to note that based on Woo’s classification, it remains unclear who exactly is considered a “whale” in the Bitcoin market.
Concerned economists caution that the US economy’s increasing inflation rates and decreasing real GDP could potentially lead to a recession. The focus now shifts towards the Federal Reserve (Fed) and its chair, Jerome Powell, as they determine the nation’s interest rate this week.
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2024-04-30 05:11