Who really owns it, the whales or small fry?

On the final day in his insurance job last week after 14 years in the sector, Donnie wore a T-shirt emblazoned with a rocket logo, the symbol for Bitcoin, and the slogan “to the moon”.

The phrase, one that characterises the fervour espoused by Bitcoin enthusiasts who say its price knows no bounds, was fitting.

Over five years, the 39-year-old has made enough money from trading digital currencies to pay off his mortgage, buy a Mercedes and now swap office life for managing his remaining crypto investments full-time.

“It was very euphoric…It’s been life-changing for me at this point,” says the California-based father of two, who has a cult-like Twitter following under the pen name ‘Bitcoin Dad’.

Donnie is just one member of a clubby community of early investors in Bitcoin who have been able to reap the benefits of its dramatic bull run, cashing out some holdings as its value more than doubled in the space of a month to peak at about $20,000 in mid-December.

He will not reveal his exact returns because his new-found wealth has already left him the victim of hacking and extortion – part and parcel of the freewheeling digital currency marketplace.

Six months after its peak, Bitcoin remains the most popular cryptocurrency, though its price has sunk to about $7,500 at the time of publication. It follows that for each of the Bitcoin millionaires, there have been numerous casualties; the “get rich quick” punters who entered the market a little too late.

‘Jump on bandwagon’

“These are people that see something moving up and start buying – they jump on the bandwagon,” says Campbell Harvey, a finance professor at Duke University and an investment strategy adviser for Man Group.

“Initially in the crypto space, you had people who really understood the technology. Then there was a typical bandwagon investor situation and you know how it ends – and it did.”

But how many have gained – and lost – from the Bitcoin bubble? Exclusive data from blockchain research company Chainalysis provides some tantalising answers.

The Chainalysis data quantifies this distinct shift in the make-up of Bitcoin owners from longer-term investors – those who held the asset for more than a year – to short-term investors who have traded more recently, by analysing how regularly coins have changed hands.

Last November – before December’s pricing peak – the amount of Bitcoin held for investment was roughly three times that held by traders.

However, by April 2018, the data show the amount held by investors – about 6 million Bitcoin – was much closer to the amount held by short-term speculators, with 5.1 million Bitcoin.

‘Liquidity event’

Indeed, Chainalysis estimates that longer-term holders sold at least $30 billion worth of Bitcoin to new speculators over the December to April period, with half of this movement taking place in December alone.

“This was an exceptional transfer of wealth,” says Philip Gradwell, Chainalysis’ chief economist, who dubs the past six months as Bitcoin’s “liquidity event”.

Gradwell argues that this sudden injection of liquidity – the amount of Bitcoin available for trading rose by close to 60 per cent over that period – has been a “fundamental driver” behind the recent price decline. At the same time,…

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