How $100K Bitcoin impacts the wealth gap in the digital age

Bitcoin’s historic price milestone on Dec. 5, surpassing $100,000 for the first time, is ushering in a new era of digital wealth creation. This milestone may provide a potential solution to bridge the growing wealth gap, but it also raises concerns over its role in exacerbating wealth inequality.

The Bitcoin (BTC) price rose to a record above the $100,000 price level on Dec. 5 for the first time in crypto history, just a month after Donald Trump won the 2024 United States presidential election.

While it has since fallen back below the mark, the asset is still up 32.1% over the past month and over 120% year-to-date, outshining most traditional finance products.

Bitcoin has generated more than 893,000 times its value since August 2011, presenting life-changing opportunities for long-term holders. According to Bitstamp data, Bitcoin’s trajectory has made it one of the most profitable assets in history.

While Bitcoin’s leading returns presented a significant opportunity for early investors, some industry experts worry that it’s too late for current investors to adopt Bitcoin as a means of creating more economic equality and bridging the wealth gap.

Could Bitcoin be the solution or the next cause of wealth inequality in the digital age?

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Bitcoin whales and institutional holders present a growing risk for existing financial inequalities

Bitcoin’s decentralization initially made it a safe-haven asset for those seeking to build wealth outside traditional finance systems.

But as Bitcoin accumulates in the hands of a few large financial institutions and “whales,” its potential for wealth redistribution is increasingly questioned.

This presents a newfound risk for Bitcoin, according to Anndy Lian, author and intergovernmental blockchain expert.

He told Cointelegraph:

“This concentration poses a risk of perpetuating existing inequalities, as those with substantial holdings can exert considerable influence over the market. The volatility and speculative nature of Bitcoin mean it is not a foolproof solution for addressing wealth inequality.”

Since the launch of US spot Bitcoin exchange-traded funds (ETFs) in January, major institutions, including BlackRock, have amassed large amounts of Bitcoin.

US Bitcoin ETFs hold nearly 1.1 million BTC, worth more than $100 billion, and are close to surpassing the holdings of Bitcoin’s pseudonymous creator, Satoshi Nakamoto.

Lian emphasized the need for regulatory oversight and strategic policy interventions to ensure Bitcoin’s potential to reduce wealth inequality.

Bitcoin at $100,000: An “asymmetric wealth creation opportunity” for true believers

Despite Bitcoin’s six-figure price tag, it is still part of a nascent, “extremely niche” market.

There is still significant wealth generation opportunity in Bitcoin since its holders are a small proportion of the global population, Bitfinex analysts told Cointelegraph: 

“Bitcoin will generate asymmetric wealth for those who believe in and hold it, and we see it as more of an asymmetric wealth creation opportunity for holders, rather than a solution for wealth inequality. This is almost akin to the purest form of capitalism, wherein any kind of flavor of banana republic is done away with.”

Bitcoin whales, or investors with at least 10 BTC, had amassed a cumulative 103,960 Bitcoin in the last seven weeks, Santiment data shows.

Regardless, Bitcoin remains the best vehicle for fueling wealth equality, Bitget Research’s chief analyst, Ryan Lee, told Cointelegraph:

“By its design, Bitcoin can still preserve wealth distribution as anyone can buy only some Bitcoin to gain exposure to the coin. For users worldwide, Bitcoin is digital money that cannot be tamed and will remain the best bet in fueling wealth equality.”

What about late Bitcoin adopters?

Despite Bitcoin’s over 893,000-fold return on investment, there is still significant financial opportunity, even for late adopters.

Bitcoin still presents a solid financial opportunity at current valuations, as it is the only asset with a fixed supply and hard-coded future inflation, Bitfinex analysts said, adding:

“We can remember back in 2017 when Bitcoin hit $1,000, many critics called it overvalued and that the train had already left the station for all investors. Bitcoin is almost 100x in value since then. There is certainly wealth creation taking place for holders.”

Economic inequality is a growing concern worldwide, including in the world’s largest economy, the United States.

From 1989 to 2021, the wealth of the top 1% of US households increased by more than $21 trillion, according to data from the Congressional Budget Office.

During the same period, the bottom 50% of US households saw a slight decline, with their share of national wealth falling to just 2% by 2021.

Late adopters could still join before global governments follow suit

While Bitcoin’s returns may be more modest after the $100,000 mark, there is still significant opportunity for generating returns.

This is because late adopters could still benefit from the growing governmental and institutional Bitcoin adoption that will increase in the forthcoming years, according to James Wo, the founder and CEO of venture capital firm DFG.

Wo told Cointelegraph:

“While early adopters inevitably reap the largest rewards, new entrants still have the potential to benefit, especially as institutional adoption accelerates. Initiatives like the Pennsylvania Bitcoin Strategic Reserve Act could push other governments and institutions to allocate some capital into Bitcoin, further solidifying its role as an inflation hedge and a long-term store of value.”

While the returns made by late adopters may not match the exponential return of the past decade, the growing institutional interest will help Bitcoin maintain its long-term price trajectory, Wo said. 

Early adopters and large whales still stand to gain the highest returns, but there is a wider opportunity for narrowing income equality in the process. Wo explained that “unlike traditional financial systems, Bitcoin provides anyone with internet access the opportunity to store and grow wealth independently of centralized banks or unstable local currencies.”

Related: Bitcoin hits $100K: Why BTC price hit a new all-time high

He added that in regions facing hyperinflation or restrictive banking policies, Bitcoin “offers a solution for financial inclusion and empowerment.”

Historically, the Bitcoin price has benefited from troubles in the traditional banking industry. The 2023 US banking crisis was a catalyst for Bitcoin’s bull run last year, according to BitMEX co-founder and former CEO Arthur Hayes.

Concerns arose over the US banking industry in March 2023 following the sudden collapse of Silicon Valley Bank and the voluntary liquidation of Silvergate Bank. Signature Bank was also forced to close operations by New York regulators on March 12, two days after Silvergate Bank’s liquidation.

The collapse of these US banks in March 2023 sparked a bull run for Bitcoin, which climbed 26% from $21,900 to $28,054 in a week.

Despite concerns, Bitcoin remains a valuable asset for those seeking to escape traditional financial systems and for late adopters who may benefit from increased institutional and governmental adoption.

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