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Henderson: While Demand From Casual Traders Slims, “HODLers” Use Crypto Winter to Execute RCBI Plans

In February last year, in our article The Crypto-HNWI Frontier Market: 144,000 Overnight Millionaires Need New Tax Residencies, we demonstrated how the number of crypto addresses with a balance equating to US$1 million or more had grown ten-fold in a single year, and used this as a proxy measure to estimate that the number of crypto-millionaires amounted to some 144,000 people:

At the moment, there is no way to precisely measure the number of crypto-millionaires. But there is at least one decent metric by which it can be roughly estimated: The number of crypto-addresses with a balance exceeding US$1 million.

In February last year, there were about 11,000 million-dollar-plus bitcoin addresses. That isn’t the same as saying there were 11,000 bitcoin millionaires; several of the million-dollar addresses may belong to a single person but, vice versa, one person may have four accounts with $250,000 in each and thus not be counted as a millionaire. In any case, the number of crypto accounts worth more than a million is an acceptable shorthand for the number of crypto millionaires.

As of Feb 20th, 2021, more than 103,000 bitcoin addresses have a balance in excess of $1 million. That’s an almost ten-fold increase in a single year.

And that only counts bitcoin addresses. We don’t know exactly how many alt-coin addresses are worth a million or more but, for the last few years, BTC has made up between 50 and 70 percent of aggregate cryptocurrency market capitalization. If we assume BTC dominance at 60%, then, using bitcoin as a proxy, we can estimate that the number of alt-coin accounts worth a million or more is about 40% of the equivalent number for BTC. That would imply that there are roughly 144,000 million-dollar-or-more crypto accounts overall.

How many crypto millionaires are there today?

Today, 18 months later, the crypto market looks very different. The price of bitcoin is less than half of what it was at the time, and bitcoin’s dominance of the overall crypto market cap is much lower than it was in Feb 2020-’22 period, when it averaged roughly 60%. Today, bitcoin’s share of the total cryptocurrency market cap is 41%.

This changes the equation for our estimate of the number of altcoin addresses with a balance exceeding a USD-value of one million; rather than multiplying the confirmed number of bitcoin addresses by 0.4 to estimate the number of altcoin addresses worth more than a million dollars, we’ll now have to multiply it by 0.59.

As of today, 66,676 bitcoin addresses are holding BTC 43 (about US$1m) or more. Roughly estimated based on BTC’s share of the overall crypto market cap, we can expect some 39,000 altcoin addresses to have a balance exceeding the equivalent of US$1 million. In other words, using the number of million-dollar addresses as a proxy, the world has about 106,000 crypto millionaires. That’s sharply down from 2021’s 144,000 but still seven times greater than in February 2021.

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Note also that while the price of bitcoin is down by about 57% since we published last year’s overview, the number of BTC accounts worth more than US$1 million is down by only 35%. This indicates that a greater number of people, in absolute terms, have accumulated bitcoin in the period. Indeed, figures from BitInfoCharts show that while some 31.7 million BTC addresses held at least some (more than a dollar’s worth of) bitcoin in Feb 2022, that number has risen to 35.6 million addresses today.

How has the crypto price fall affected demand for investment migration?

Andrew Henderson, founder of Nomad Capitalist, tells IMI he's noticed the crypto price pullback's effect on interest in investment migration from that particular customer group.

"We've seen volume [of inquiries from clients whose net worth primarily comes from crypto holdings] drop by about two-thirds," he says. "What we're not seeing so much of anymore are the guys who have crypto jobs, like the guys who get $5 million a year between options and salaries, paid in crypto. We're also not seeing so many of the casual traders anymore."

Among the crypto wealthy who still reach out, however, interest is even stronger now than in the past.

"Those who remain are the more successful crypto people, the true believers who bought in at lower prices, who - I believe - are the smart ones who see the market going up and are looking at this as an opportunity to go back to end-of-2020 prices and, essentially, wipe out that tax liability," says Henderson. "We're seeing the long-term 'HODLers' and people who hold crypto as part of their overall mix."

While Henderson remarks he's seen very few of his crypto-investor clients back out of their global diversification plans altogether, some have had to scale down. One individual, who held a disproportionate share of his capital in a cryptocurrency that's seen its price drop by more than 90% from the peak, still wanted to go ahead with investment migration but could no longer afford to pick from the top shelf of programs.

"He told me, 'I paid you and I want to proceed, but I just went from having $20 million to having $1 million, so, obviously, I'm not doing Malta citizenship anymore."