How Many People Own Bitcoin?

Background: One of the most important signals in understanding Bitcoin’s health is the number of Bitcoin owners. Unfortunately, given Bitcoin’s fragmented infrastructure and pseudonymous blockchain, there is no definitive answer at present. However, we can explore certain data points to help us better understand and/or to make an educated guess. Given the importance of finding this number, we hope this article sparks the fire for a new conversation in the crypto community for this topic.

So what data points do exist? We found three interesting ones:

(1) Coinbase: Some of the world’s biggest exchanges advertise the number of users they have. Coinbase, for instance, reports having “served” 20+ Million customers. But what does a served customer actually mean? A cynic could argue that Coinbase has an incentive to use a liberal definition to show adoption and consequently attract more users and capital. So the 20+ Million can be thought of as an upper bound of Coinbase users.

(2) Blockchain.info: As another example, Blockchain.info’s wallet, a popular free hot wallet for BTC, advertises that it has 25.1M users. While the website provides us a detailed time-series of the number of wallets, it’s not obvious how many wallets each user might have, as well as how many Bitcoin holders do not have a Blockchain.info wallet.

(3) National Surveys: Lastly, in January 2018 there was a poll conducted in America which showed that 5% of Americans hold Bitcoin. Using some high-level math, 5% of the American population brings us to about 16.25 million American bitcoin holders. Yet this data point is faulty since the survey not only has a small sample size of 5,761 people but also just focuses on America. Given that more Bitcoin is exchanged in Japan than the US (in fact 70% of all BTC is exchanged using Japanese Yen), we are missing a big segment of Bitcoin users.

Clearly, these data points are not enough, so we will need a new approach to solve this challenge:

Our Approach: Before we get to the solution, let’s start with the basics. How does somebody define a Bitcoin holder? We will say a Bitcoin holder is: “anyone who owns over .001 BTC (about $7).” The reason we pick $7 as the cut-off for defining Bitcoin ownership is that over the past year, the average transaction fees to move Bitcoin have been close to $7. Why store money in Bitcoin when it can be possibly wiped out by transaction costs?

Now the beautiful thing about Bitcoin is that we can see everything. Well, almost everything. What we can see is that there are a total of 11.2 million Bitcoin addresses that hold at least .001 BTC. We get this data straight from Bitinfocharts.com, which has scanned the entire Bitcoin blockchain and produced some awesome primary source data. So, that is what we can see. Unfortunately, those numbers only tell us so much, since one address can hold millions of users (i.e. one address can be an exchange), and one person can hold millions of addresses. Holy moly!

To solve this dilemma, let’s start with what we know. 11.2 million addresses with more than 0.001 BTC. Cool. Next, we know that these addresses can be either held by an individual, or by an exchange. This fact is important because it is the basis for the approach. Then we can simply count the number of Bitcoin owners who hold individual addresses, count the number of Bitcoin holders who belong to exchanges, add up those two numbers, and then we get to our total.

Now, to the action…

The Nitty Gritty: We will first start with finding the number of Bitcoin owners who have individual addresses. As we said before, there are 11.2M addresses held by individuals on the blockchain. Assuming that the typical owner can be linked to 2 addresses on average, brings us to 5.05M people who own Bitcoin in this bucket. This assumption comes from our intuition, given the difficulty of finding data on the average number of addresses for a Bitcoin holder. Now to the exchanges.

For this calculation, we will just focus on exchanges that have a top 150 cold storage wallet based on Bitcoin holdings. The reason for this assumption is that if an exchange’s address is below that magic 150, we will say that it has too few users to affect our total number of Bitcoin owners.

As seen in this chart below, there are seven exchanges who fit this benchmark. Some famous exchanges such as Coinbase are not listed because it was impossible to identify which public addresses belong to them:

Unfortunately, of these exchanges, only Bitfinex, Binance, and Bittrex have reported its number of accounts for March 2018, which is a total of 10.0 million people. That is a lot of people. Given the amount of USD these three exchanges have in Bitcoin and knowing its number of accounts, we can give an estimate of how many accounts are in the other exchanges that fit our benchmark. That brings us to 16.3 Million accounts.

But again, accounts are not users. For our purposes, we will assume that each user on average holds two accounts among the mentioned exchanges. Since there are so few pieces of information relating to how many accounts on exchanges a given person holds, our assumption is based off intuition. From that assumption, we get that us 16.3 Million /2 = 8.15 Million total people who hold Bitcoin on exchanges.

So we are almost at the finish line. We just add up the number of people own Bitcoin in the individual and exchange addresses, and we get 5.05M + 8.15M = 13.20 Million total people who own Bitcoin. We made it. We did it.

Conclusion: Well, not quite. There were many assumptions that were made, as well as many exchanges we could not include in our calculation simply because it is impossible for us to know which addresses they possess. So for all we know, there could be 10M, 40M, 100M Bitcoin users. Who knows.

That being said, these numbers are likely to be reasonable since there is little more than half a million active BTC addresses daily, according to BitInfoCharts. From that value and based on our own work, we calculate that 3.78% of Bitcoin holders are making moves. This value seems reasonable, while if we got values such as 0.01% or 40% of Bitcoin addresses than our calculation for the number for Bitcoin holders would have been a cause of concern.

Through our approach, we discovered there to exist most likely 13.20 million holders of Bitcoin. As we said from the start, we did not expect our number to be exact, but rather an estimate. In addition, we wanted this article to ignite a conversation, as well as hopefully teaching you some new things about Bitcoin along the way. Take care, and talk to you soon.

CoVenture operates 3 businesses that bridge technology and finance: pre-seed VC, tech-enabled credit opportunities, and quantitative cryptocurrency trading