Bitcoin Under the Microscope

This paper explores and describes historical on-chain transaction data recorded on the Bitcoin blockchain, constructs a panel of all individual Bitcoin users, and computes their balances in the cross-section and over time. We run clustering algorithms to combine addresses that belong to the same user into wallets and we find that using wallets over addresses as the unit of analysis allows for more economically meaningful interpretations of user behavior. We identify and divide wallets into user categories - miners, exchanges, services, retail wallets and receiving-only addresses - and observe varying activity levels and balances in the cross-section and over time, corresponding to their intended role in the Bitcoin network. Our findings also suggest heterogeneity in financial performance across user categories with miners exhibiting higher realized returns relative to exchanges and retail users