I always chuckle when I read articles talking about how the rise of cryptocurrencies is “the single largest wealth transfer in the history of mankind”...as if that’s a good thing.

I mean seriously, let’s take a look at exactly where this wealth is being transferred from.

One look at the Bitcoin distribution curve tells you that there are less than 1% of all addresses that own more than 87% of all the bitcoins mined so far.

Those addresses belong to predominately two types of holders :

1) the super geek/cypherpunk early adopters from nearly a decade ago and

2) the rich venture capital type investors or other prominent Silicon Valley types who could afford to spend a sizable amount of money on something that has zero fundamentals, as a “punt” and would still be 100% fine if everything went to zero.

And with the extreme volatility that these coins have seen, particularly in the last year, its safe to say that the money flow has gone from the middle of the bell curve (average moms and pops who have no business trading crypto) back to the 2 groups of original holders.

In other words, the single largest wealth transfer in the history of mankind has gone from the innocent bystanders back to the WRONG PEOPLE.

Here are the consequences of the concentration of Bitcoin wealth:

1. Greed — One look at this headline says it all. Those who aren’t in the concentrated elite of “whale” bitcoin holders, will do almost anything to get there.

How’s that for a wealth transfer?

2. Volatility — In any asset class if there are a small number of hands that own majority ownership you are going to likely see a LOT of volatility.

Now, people take both sides of this debate when it comes to crypto. On the one hand some of the super bulls early adopters who “don’t care” about money are likely to hodl on just out of principal as are people such as the Winklevoss twins who not only don’t need the money but are also idealists.

Other pundits such as Soros argue that the more volatility Bitcoin see the more it will draw out larger players in the game.

Indeed the near term risk comes from the middle players so to speak such as the hedge funds and large private speculators who are in the upper middle section of the bell curve.

These people have no idealistic views on the coin and are purely speculating for profit. What that means is that they are much more likely to sell down in a mini correction and not think twice.

This also could cause a snowball effect which we’ve seen causes a drawdown of upwards of 50% in any given coin.

I also know for a fact that many of these larger players collude. Yes.

In the long term, the greatest threat and consequence to Bitcoin won’t be anything of a regulatory nature or hacking (we’ve seen it weather such storms well in the past) but rather a mass exodus by the idealists and upper middle players into the “next best thing” or Bitcoin 2.0.