USA, MicroStrategy, BlackRock: Are the big players threatening Bitcoin?

BlackRock, MicroStrategy and U.S. government: central agencies see Bitcoin's potential and are buying the cryptocurrency in billions of dollars. Already now ETF issuers, MicroStrategy and the U.S. government own 1.7 million BTC, about eight percent of the total circulation, and there is no end in sight to the purchases. Critics see a problem in this but is it really so?

Because of Proof-of-Work: Little risk of centralization?

MicroStrategy does not pose a Black-Swan risk to Bitcoin. However, a high concentration of supply can be a risk for Proof-of-Work blockchains, Since Ethereum switched from Proof of Work to Proof of Stake in 2022, centralization has increased. The reason: the more money a network participant has, the greater its influence. Bitcoin is still based on the Proof-of-Work consensus mechanism. Although there are also problems with decentralization with Bitcoin.

Game theory works

That the Bitcoin network can defend itself against attacks by large corporations has already been proven. This incident is known as the Blocksize War.

The "war" began in 2017 as a discussion about block size. Founder Satoshi Nakamoto set the block size at one megabyte per block to allow everyone to participate. Currently, the blockchain is 630 GB in size. However, if the blocks were larger, the blockchain would grow faster and take up more space. And the more space needed, the more expensive it would become for end users to operate their own node. The network would become more centralized.

The proposal to increase the block size to eight megabytes found support from the largest companies in the industry. Coinbase, Grayscale, the Digital Currency Group, major mining companies, ASIC manufacturer Bitmain and numerous other major Bitcoin service providers met in 2017 to discuss a change to the code. In the so-called New York Agreement, they agreed on a new block size of two megabytes per block.

"The group of signed companies represents a critical mass of the Bitcoin ecosystem," the release reads. In total, these companies represented 83.28 percent of the computing power in the network, processed US$5.1 billion in then smaller transaction volume each month and managed 20.5 million wallets.

One would think that a privileged, influential collaboration of industry giants could easily adapt or shape Bitcoin to their representation. But the Bitcoin community also had a right to vote. Instead of the industry giants, those who Bitcoin was created by pushed through: the users.

Risk: Central custody

So the high BTC concentration in a few central corporations or states is not a problem. Even an attack by these actors powerful in the fiat world should defy the community.

More at risk, however, are investors who invest in MSTR or the ETFs of BlackRock and co. After all, Coinbase takes over custody for most ETFs, and Michael Saylor's Bitcoin company also uses the U.S. exchange to store the "coins."

Honey Badger don't care The biggest but momentary risk for Bitcoin investors is: a spontaneous sale. If MicroStrategy sells its stock, it would lead to a huge sell-off on the market. Many investors influenced by Michael Saylor would also turn away from the leading cryptocurrency. Since Saylor is one of the biggest Bitcoin maximalists, however, that is unlikely.

More likely is the sale by the U.S. government. A look at the current plans of US Senator Cynthia Lummis reveals: a sale is even planned in the future. With the potential Bitcoin reserve, the US at least wants to reduce its debt burden.

In other words: Convinced Bitcoin investors do not fear a massive sell-off. Rather, these investors are looking forward to a temporary drop - to buy more cheaply.