Bitcoin ETFs Outpace Satoshi’s Wallet: A Milestone for Institutional Crypto

Satoshi Nakamoto’s real identity is unknown. He could be an individual or a group, dead or alive. When discussing, building, and maintaining Bitcoin, he always used his pseudonym.

The transparency of Bitcoin’s digital ledger makes one thing clear: Satoshi Nakamoto is the greatest single holder of Bitcoin. His wallet contains 1.1 million BTC worth over $110 billion at its peak.

However, this may not always be the case. Within a year of Bitcoin exchange-traded funds (ETFs) becoming legal in the US, they amassed over 1.104M BTC. Of this, over half (521,375 BTC) is held by BlackRock’s IBIT spot Bitcoin ETF. While no single fund rivals Nakamoto’s holdings (yet), this represents a significant advance in the adoption of Institutional Crypto.

TradFi institutions are only just beginning to move into the blockchain and crypto space as the technology proves its potential utility and value. Achieving this milestone demonstrates the level of interest that the general public has in blockchain and will likely herald an expansion in Institutional Crypto.

Inside Satoshi’s Fortune

For many modern crypto projects, the potential payoff for the founders is baked into the project. When a new token is launched, a certain percentage of the total supply is typically set aside for the project team. If the project is a success and the token’s value rises, then the team can later sell these tokens to compensate them for their efforts. This design is also what makes rug pulls possible since founders can pump up the value of their token, then dump their allocation to make a quick profit.

This isn’t the case for Satoshi Nakamoto’s massive Bitcoin holdings. When the Bitcoin network was launched, there was no preexisting supply or tokens allocated to its creator.

Satoshi’s fortune comes from the fact that he was mining Bitcoin from the very beginning. At this time, the Bitcoin network’s hashrate was very low since only Satoshi and a few other early adopters were mining. This gave him a high probability of creating blocks. At the same time, each block carried a reward of 50 BTC, compared to the 6.25 BTC of blocks created today. With blocks created every 10 minutes on average, it would take 22,000 blocks or about five months' worth of blocks to build up the supply of BTC contained in Satoshi’s account.

This allowed Satoshi to rapidly build up a fortune in BTC. At the time, they were essentially worth nothing. However, this has changed over the years, with BTC hitting all-time highs of over $100,000, creating a substantial fortune. However, these billions in BTC remain in Satoshi’s account.

The Rise of Institutional Crypto

When Bitcoin was first created, it was intended to disrupt the traditional financial (TradFi) industry. Bitcoin implements a global payment system without the need for TradFi's centralized payment infrastructure. Smart contract platforms like Ethereum and Solana expand blockchain’s capabilities, allowing decentralized finance (DeFi) to do everything that TradFi can and more.

Over time, TradFi has moved into the crypto and DeFi space. Blockchain technology offers potential solutions to modernize and streamline financial institutions’ operations. For example, performing cross-border remittances on the blockchain takes minutes and costs very little compared to multi-day expensive wire transfers.

Bitcoin ETFs See Massive Success

Bitcoin ETFs provided an opportunity for traditional inventors to engage with blockchain and crypto without the complexity and risk of doing so directly. While crypto allows users to “be their own bank,” doing so requires a certain level of technical knowledge and acceptance of the risks associated with investing in a risky and under-regulated space.

With a Bitcoin spot ETF, TradFi institutions hold Bitcoin on behalf of their users. Investors can then get exposure to crypto by purchasing the ETF via traditional investment channels rather than buying and holding Bitcoin directly. This eliminates much of the technical overhead of “owning” Bitcoin and provides additional protection for investors.

The fact that the total value of Bitcoin ETFs has exceeded that of Satoshi’s wallet is a major milestone for Institutional Crypto. Satoshi has long been the largest BTC holder because he “got in on the ground floor” and was able to amass BTC when doing so was cheap and easy. Bitcoin ETF buyers, on the other hand, are paying for access to crypto, and prices are higher than ever.

What’s Next for Institutional Crypto?

The huge success of Bitcoin spot ETFs has significant implications for the future of crypto in general and Institutional Crypto in particular. These ETFs have grown far beyond analysts’ initial expectations, demonstrating that many people are interested in crypto and its potential but were deterred by the complexity of getting involved in the space.

Institutional Crypto offers an on-ramp for the general public to take advantage of the capabilities of crypto and DeFi. While it deviates from Satoshi’s original vision for Bitcoin — replacing TradFi institutions with a decentralized alternative — Institutional Crypto provides numerous benefits to its users since many of the benefits and protections offered by blockchain technology are still in place. Bitcoin spot ETFs — and spot ETFs for other crypto like Ether — are likely only a starting point for Institutional Crypto. Now that TradFi institutions have proven that widespread interest exists, they can work to develop and deploy additional products for the retail user that offer safer and more user-friendly access to blockchain’s capabilities.

Building the Future of Crypto

Crypto will likely never be the complete replacement of TradFi that Satoshi envisioned. Now that blockchain technology is more widely accepted, TradFi is more likely to adopt and adapt the technology to its needs rather than be replaced entirely. At the same time, the crypto space will likely keep pushing the envelope to develop the next big thing or new application of blockchain.

When designing and building these applications, security is key to earning and keeping trust. The crypto space has a reputation for frequent hacks, often with price tags in the millions.

Often, these hacks exploit simple vulnerabilities or holes in an organization’s security programs. For help in ensuring the security of your on-chain project, reach out to Halborn.