LONDON - Bitcoin, the star of the cryptocurrency world, is widely seen as a freewheeling tool as open as the internet itself.
But analysts have cast doubt on the veracity of that perception, highlighting that the bulk of bitcoin is in fact heavily concentrated in the hands of a powerful few.
Some 1,000 bitcoin holders -- out of a total 11 million -- hold some 35.4 percent of currency, according to BitInfoCharts.
These bitcoin "whales" -- a word popularly used for big money players in financial markets -- "literally control the currency", said Bob McDowall, an expert in cryptocurrencies.
They can "dictate monetary policy, which is normally the function of a central bank or a government", he said.
Unlike central bank-issued denominations, virtual currencies are produced, or "mined," by banks of computers solving complex algorithms and freely traded online.
The other key difference with typical currencies is that the number of bitcoin in existence can never exceed 21 million.
There are currently some 17 million bitcoins in circulation.
Bitcoin's surge in value from a few cents to a peak in December 2017 of $19,500 turned some of its first investors into billionaires.
The BitInfoCharts study also found that the top 10 account holders held 5.96 percent of the bitcoins.
Experts cautioned that the statistics should be taken with a pinch of salt, however, as several individuals could be behind a single account and one person could hold several accounts.
'WHALES' WITH POWER
In a 24-hour period between Monday and Tuesday, the 100 biggest bitcoin transactions out of 200,000 accounted for 24 percent of the money volumes -- an unimaginable level of concentration compared to other markets.
"In the currency market for example it's such a huge market with so many transactions in a day that a pure actor can't have any influence on a market," Craig Erlam, an analyst for Oanda, a currency trading platform, told AFP.
Big bitcoin players, by contrast, can hold a lot of sway over the market.
To try and prevent excessive falls in the value of the currency, observers believe that the "whales" may be checking with each other first before putting in major orders, leading to suspicions of fraud in this unregulated market.
US authorities in May opened a criminal investigation into possible market manipulation of bitcoin and other cryptocurrencies, suspecting traders of "spoofing" -- putting in false orders and quickly withdrawing them to move the currency.
But Aaron Brown, former director of AQR Capital Management, who runs a bitcoin fund, said the role of "whales" is being exaggerated.
He admitted that a coordinated sale of bitcoin by the biggest accounts could cause the value of the currency to plunge but said that the risk was theoretical and that major historical investors in the currency have a strong sense of community.
Since the end of 2017, the concentration of bitcoins has decreased, according to a study by Chainalysis, a think tank.
Several long-term investors have sold their bitcoins and a new type of player has entered the scene -- speculators, who tend to hold fewer bitcoins but carry out more transactions.
"The supply of bitcoin available for trading has increased by 57 percent since December 2017," the Chainalysis study found.
source: news.abs-cbn.com
TOKYO - From clampdowns to a warm embrace, regulators in Asia have taken very different approaches to dealing with the bitcoin phenomenon. Here are the developments in a few key markets:
CHINESE CLAMPDOWN
In mid-September, China's central bank, the People's Bank of China (PBOC), told virtual currency trading platforms based in Beijing and Shanghai to cease market operations.
Authorities also clamped down on ethereum and any other electronic units that are exchanged online without being regulated by any country.
The PBOC said it wanted to fight "speculation" around the crypto-currencies, which "seriously disrupted the financial system".
This came after the National Internet Finance Association of China -- an offshoot of the PBOC -- drew up a damning report on virtual currencies, saying they were "increasingly used as a tool in criminal activities" such as drug trafficking.
Experts say Chinese authorities are also concerned about possible capital flight which could harm the value of the yuan.
However, the authorities in Beijing have not yet attacked bitcoin mining -- the creation of the digital currency.
Between 60 and 70 percent of new bitcoins are created in China.
KOREAN CONCERN
Hyper-wired South Korea was also a hotbed for virtual currencies such as bitcoin, accounting for some 20 percent of global transactions, about 10 times its share of the world economy.
But South Korean authorities late last year banned financial institutions from dealing in virtual currencies on fears of a bubble fuelled by retail speculators.
About one million South Koreans, many of them small-time investors, are estimated to own bitcoins and demand is so high that prices are around 20 percent higher than in the US.
Initial coin offerings (ICOs) -- where companies sell newly mined cryptocurrencies to investors for real money -- were also outlawed.
The government has also pledged to strengthen investor protection rules, in an effort to curb speculation and potential fraud.
Announcing the ban on ICOs in September, South Korea's Financial Services Commission declared "cryptocurrencies are neither money nor currency nor financial products".
Youbit, a South Korean exchange trading bitcoin and other virtual currencies, declared itself bankrupt in December after being hacked for the second time this year.
North Korea was accused of being behind the first attack.
SINGAPORE CAUTION
Singapore's central bank has issued a warning over cryptocurrencies, cautioning the public about the risk of jumping in on the "bitcoin bubble".
The Monetary Authority of Singapore noted they are not backed by any central bank and are unregulated, which means those who lose their investments have no grounds for redress under Singapore law.
Yusho Liu, co-founder of Singapore-based cryptocurrency wallet Coinhako, says demand has been soaring, with transactions up around 10-fold over the past year.
However, while regulators have been prepared to offer a cautious free rein to the digital units, "financial institutions and service providers have been rather resistant", Liu told AFP.
"In fact, I believe that only 30-40 percent of the market potential is fulfilled because of the friction generated by such matters. This is the key missing piece of Singapore being the fintech hub," said Liu.
JAPANESE JUMP-IN
The high-profile collapse of digital currency exchange platform MtGox failed to douse the enthusiasm for virtual currencies in Japan, which in April became the first country in the world to proclaim it as legal tender.
As many as 10,000 businesses in Japan are thought to accept bitcoin and bitFlyer, the country's main bitcoin exchange, saw its user base pass the one-million mark in November.
Many Japanese, especially younger investors, have been seduced by the idea of strong profits in the context of ultra-low interest rates that offer little in the way of returns.
However, the governor of the Bank of Japan, Haruhiko Kuroda, has recently issued a warning that the recent rise of the bitcoin price was "abnormal".
source: news.abs-cbn.com
