In the bear market, many already large Ethereum (ETH) addresses have increased their holdings by over 80 percent this year. Analysts believe that this increase was financed by the sale of ICO tokens. At the same time, however, the absolute number of these so-called “whales” fell.
Diar’s blockchain analysts have observed an interesting trend in the deposits of the largest active Ethereum (ETH) addresses. In the latest edition of the weekly publication, the authors noted that 500 of these “whales” have increased their combined ETH reserve by a good 80 percent since January.
While this group had eleven million ethers at the beginning of the year, the figure had risen to 20 million by November. This means that they control almost 20 percent of all ETH in circulation. Some people continued to shop even after the crypto currency gradually lost over 90 percent of its value after its all-time high in January.
Whale population declines
If we look at the properties of all Ether whales, they were the largest in February 2017 at 33.3 million ETH and fell by a good quarter by November of this year. At the same time, however, the number of whales has fallen by almost 30 percent since the beginning of 2018, so that the distribution of the remaining digital coins has become even more centralized.
Possible return of ICO investors
The Diar authors assume that mainly money from ICO projects has flowed back into Ethereum. Initial coin offerings are the first way to acquire new tokens, usually by making payments to ETH. In the past, the concept brought in billions for projects such as EOS, but now the financing method is mainly known for bad news.
In November, the US Securities and Exchange Commission (SEC) imposed a fine of 250,000 US dollars each on the two ICO projects Airfox and Paragon for selling unregistered securities. A month earlier, the blockchain media platform Civil had not even reached 20 percent of its ICO target.
Even if one looks at the market as a whole, the picture remains gloomy: The auditing firm Ernst & Young published a study in October according to which 86 percent of the projects launched in 2017 are currently trading below their listing price and 30 percent have “essentially lost all value”. After the price falls in November, things are likely to look even more devastating. In view of this situation, it is quite possible that many investors have returned to the seemingly more solid Ethereum.
Why is this of relevance?
There are certainly some exchange wallets among those who bought these large sums of ETH but sprinkled in between them are also “real” whales, either individuals or, more likely, institutions who are accumulating. This is perceived as a good omen as it indicates that people who are already heavily invested in ETH are still firm in their conviction about Ethereum success. Rule of a thumb in crypto is, if you don’t know what to do, find out what whales are doing and follow their trail.
Why is this bad?
20% of overall supply is a lot of money and it introduces another centralization point into the Ethereum system, aside of the centralized mining and centralized software development. In essence, Ethereum is going backwards in terms of ownership centralization, approaching Ripple numbers (Ripple is still far more centralized in this aspect as the company holds in a lockup more than 55 billion out of 100 billion tokens).
Someone is preparing for PoS?
Knowing that Ethereum is about to switch to proof of stake consensus mechanism, this poses a danger of cartel emergence in the Ethereum ecosystem as you can stake a lot of coins and exert a lot control over the network while getting even more richer in the process. Proof of stake invariably leads to oligopoly and caste-forming, which is a flawed system we already have.