The Challenge of Quantifying Bitcoin Users
One persistent question among Bitcoin researchers and investors is: How many individuals truly own and use Bitcoin? Despite having access to the entire public ledger of transactions, accurately assessing the number of users in the Bitcoin network remains complex.
Traditionally, the number of Bitcoin addresses has been used as a proxy for user count. However, this approach is flawed because:
- Single addresses can hold funds for multiple users (e.g., exchange wallets).
- One entity may control multiple addresses for privacy or operational reasons.
Advanced Methods for Estimating Bitcoin Entities
To refine these estimates, Glassnode employs a hybrid methodology combining:
– Industry-standard heuristics
– Proprietary clustering algorithms
– Advanced data science techniques applied to raw on-chain data
This approach allows us to:
– Map multiple addresses to single entities
– Exclude cases where one address serves multiple users (e.g., exchanges)
– Introduce the concept of “entities” rather than individual users
Key On-Chain Metrics Developed:
- New Entities: Unique entities appearing for the first time in transactions.
- Entity Net Growth: The difference between new entities and those whose balances drop to zero (“disappearing entities”).
- Whale Entities: Entities holding ≥1,000 BTC (excluding exchanges).
- Active Entities: Entities sending or receiving Bitcoin within a timeframe.
👉 Discover how these metrics reveal Bitcoin’s adoption trends
Bitcoin Entity Statistics: Key Findings
1. New Entities vs. New Addresses
- In 2019, daily new addresses averaged 355,000, while new entities averaged just 100,000 (~28%).
- This ratio fluctuates—a declining ratio (as seen in early 2018) suggests increased activity from existing users rather than new adopters.
2. Total Bitcoin-Holding Entities
- As of January 2020:
- 23.1 million entities held Bitcoin (vs. 28.4 million non-zero addresses).
- Entity counts grow steadily, while address numbers can decline sharply (e.g., 2018’s drop).
3. Entity Growth Trends
- Daily net entity growth has been positive for 99.9% of Bitcoin’s history—only 21 days showed negative growth.
- This indicates sustained, organic adoption, unlike the volatile address metrics.
4. Whale Concentration
- 75 entities held ≥10,000 BTC as of 2020.
- 7 exchange entities held ≥100,000 BTC (13% of circulating supply):
| Exchange | BTC Held (2020) |
|——————|—————–|
| Coinbase | 983,800 |
| Huobi | 369,100 |
| Binance | 240,700 |
| Bitfinex | 214,600 |
| Bitstamp | 165,400 |
| Kraken | 132,100 |
| Bittrex | 118,100 |
👉 Explore how exchanges influence Bitcoin’s liquidity
Distribution Analysis
By Address Control
- 96% of entities control just one address.
- Largest clustered entity: Coinbase (2.2 million addresses).
By Balance
- Power-law distribution:
- ~22.3 million entities held <1 BTC (omitted in charts).
- Exchanges dominate the >100,000 BTC category.
Frequently Asked Questions (FAQs)
1. Why use “entities” instead of “users”?
Entities account for address clustering (one entity controlling many addresses) but not shared ownership (e.g., exchange wallets serving thousands of users). This provides a conservative upper bound for true user counts.
2. How reliable are these metrics?
Glassnode’s methods stabilize fluctuations to <1% variance. However, metrics may adjust slightly as new data refines entity clustering.
3. What does positive net entity growth signify?
It reflects Bitcoin’s long-term adoption trend, showing consistent new entrants despite price volatility.
4. How do exchanges impact entity statistics?
Exchanges consolidate vast amounts of BTC under single entities, skewing balance distributions. Whale counts exclude them to assess individual/institutional holdings.
5. Can entity growth predict price trends?
Not directly, but sustained growth suggests network health—a foundational factor for long-term valuation.
6. What’s the takeaway for investors?
Entity metrics reveal real-world usage patterns beyond speculative trading, helping assess Bitcoin’s maturity as an asset class.
Conclusion
Glassnode’s entity framework offers unprecedented clarity into Bitcoin ownership:
– 23.1M+ entities held BTC in 2020, growing steadily.
– Exchanges dominate large balances, highlighting their market influence.
– Whale entities provide insights into institutional behavior.
These tools move us closer to answering Bitcoin’s ultimate adoption question—not just how many addresses, but how many meaningful holders drive its economy.