New Research Reveals ‘Systemic Risk’ To Bitcoin As Its Price Crashes Under $60,000

Bitcoin and cryptocurrency prices have soared this year, pushing the combined cryptocurrency market to more than $2.6 trillion, as major investors and Wall Street flock to digital assets.

Bitcoin price has added nearly 400% since this time last year, jumping to over $60,000. However, bitcoin has fallen sharply in the past 24 hours, dropping below the closely watched $60,000 level.

Before the bitcoin price plummeted, researchers found that the cryptocurrency was still concentrated among a handful of holders, warning that this left “Bitcoin exposed to systemic risk.”

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“Our results indicate that despite the significant interest that bitcoin has received over the past few years, the bitcoin ecosystem remains dominated by large and focused players, whether they are major miners, bitcoin holders or exchanges,” according to analysts from the National Bureau of Statistics. Economic Research Books.

“This inherent focus makes bitcoin vulnerable to systemic risk, and also indicates that the majority of gains from further adoption are likely to fall disproportionately to a small group of participants.”

The researchers found that the largest 10,000 bitcoin holders owned about 27% of the total 18.6 million coins in circulation at the end of 2020, with a high degree of concentration between cryptocurrency exchanges and so-called miners — those who secure the bitcoin blockchain in exchange for a new currency. minted coins. The top 10% of miners control 90% of Bitcoin’s mining capacity, with only 0.1% – about 50 miners – contributing 50% of this.

“This measurement of concentration is likely to be an underestimate since we cannot rule out that some of the largest addresses are controlled by the same entity,” researchers Igor Makarov and Antoinette Schwar write, referring to several early mined bitcoins that are likely to be mined. They are all controlled by the mysterious Bitcoin creator Satoshi Nakamoto but are spread out at about 20,000 different addresses.

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The researchers warned that such high levels of concentration mean the bitcoin network is vulnerable to a so-called 51% attack, in which miners could collude to reverse transactions. Such a scenario occurred in 2014 when the Ghash.io mining pool briefly controlled 51% of all Bitcoin network processing power.

The massive surge in bitcoin and cryptocurrencies this year, which has taken the common market from around $700 billion to more than $2.5 trillion, has alarmed regulators and central bankers who fear an imminent collapse.

Earlier this month, influential central bank governor John Cunliffe, who is currently the Bank of England’s deputy governor for financial stability, warned of a “massive collapse in crypto-asset prices. [is a] A plausible scenario” and called for urgent regulation of the fast-growing bitcoin and cryptocurrency market to prevent it from becoming a threat to the broader financial system.

Despite the warnings and Bitcoin’s dip below $60,000, Bitcoin and cryptocurrency traders remain bullish.

“The bulls are still chasing a three-digit end of the year, although the $70,000-$90,000 range is likely to be more realistic, with three figures likely to emerge towards the end of the first quarter of 2022, Tim Frost, CEO of Yield trading app, in the comments via email.

Last week, a panel of 50 bitcoin and cryptocurrency experts predicted that the price of bitcoin will continue to rise through 2021, hitting a high of about $80,000, before climbing to $250,000 by 2025 and $5 million per bitcoin by 2025. 2030.

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