Centralized Treasuries Now Control 30.9% of Bitcoin's Circulating Supply, Report Finds

This includes holdings by governments, exchange-traded funds, and public companies that have adopted Bitcoin as a strategic reserve asset over recent years.

Centralized treasuries now hold 30.9% of Bitcoin's circulating supply and President Trump's executive order to establish a working group for a Strategic Bitcoin Reserve has given official government to Bitcoin adoption at the sovereign level, according to a new report by Gemini and Glassnode.

The analysis, titled "Bitcoin: A Tale of Centralization and Decremental Volatility," delves into the integration of Bitcoin into traditional financial systems and the role of institutional investors in shaping the cryptocurrency's market dynamics.

Over recent years, corporate treasuries have increasingly allocated a portion of their reserves to Bitcoin as part of long-term holding strategies. Concurrently, institutional investors have continued to launch new products, such as exchange-traded funds (ETFs) and regulated derivatives platforms, that track Bitcoin's price movements and provide liquid exposure to the cryptocurrency.

"This shift in institutional demand has changed the structure of Bitcoin's on-chain economy and altered the competitive landscape within the ecosystem," the report stated.

Indeed, centralized platforms have captured the majority of Bitcoin's trading activity. The report found that, when adjusting for internal exchange transfers, centralized exchanges, U.S. spot cryptocurrency ETFs, and regulated derivatives platforms now process more than 75% of Bitcoin's adjusted transfer volume. This is a substantial increase from previous years when on-chain activity comprised a larger portion of total volume.

This shift toward centralized infrastructure has occurred in tandem with reduced price volatility across all timeframes.

"Annualized realized volatility has declined consistently since 2018 as adoption has broadened, particularly among sovereign entities and regulated financial institutions," the report noted. "This reduced volatility suggests that institutional participation has provided stabilizing effects on Bitcoin markets."

While Bitcoin remains a risk-on asset, its integration into traditional finance has created more consistent price action with less influence from speculative extremes.

Large-scale holders usually invest for the long term and avoid making quick, reactive trades like retail investors. This contributes to smoother price movements and reduced susceptibility to sudden market swings.

"The president's executive order has brought attention to the potential impacts of sovereign allocators on Bitcoin markets," the report added.

According to the analysis, for every $1 invested by sovereign allocators like the Strategic Bitcoin Reserve, up to $25 of short-term market capitalization growth could be unlocked. The multiplier effect is realized through supply dynamics as well as market psychology.

This is because institutional purchases, being significant, will compel other market stakeholders to make additional purchases in an effort to front-run institutional purchases.

Long-term structural value creation is less upbeat yet also optimistic, with approximately $1.70 of value creation for every dollar of sovereign investment. This implies that while the short-term market response may be exaggerated, long-term price appreciation requires higher mainstream usage and utility creation, rather than speculative demand.

The degree of Bitcoin ownership by centralized players is a threat to the decentralization values that initially drove the creation of cryptocurrency. However, institutional adoption also brings legitimacy and infrastructure development, which could support broader Bitcoin integration into mainstream financial systems.

The report concludes that the sustained involvement of institutional investors will be pivotal in determining the efficiency and stability of Bitcoin markets in the long run. As such, understanding the interplay between institutional and on-chain activity is crucial for comprehending Bitcoin's price trends and broader market dynamics.