A study published on Wednesday by a Blockchain analysis startup indicates that a third of all, ethereum’s native cryptocurrency ether is owned by just 376 whales as of May 1. The study also reveals that this supposed high number is actually down from levels seen in 2016 and 2017. The said 376 individuals control 33 percent of the ether in circulating supply for 2019.
Regarding the effect of possession of a considerably large portion of ether by these ‘whales’ on the market value/price of ether (ETH), the impact is not exactly of high relevance. Even at that, any large sell-offs they make reflects an intraday volatility increase in the cryptocurrency market. According to the analysis startup, whales are the top 500 holders of cryptocurrency excluding services, who store their holdings off exchanges. Currently, it was found that just 7 percent of all transaction activity is on account of ether whales.
An analysis of the impact of whales sending and receiving funds to and from exchanges using a vector autoregression (VAR) model which is common in the financial time series the analysis was done. Via this, they found that funds sent may impact volatility of ether but not price and the funds received have no impact either on prices or intraday volatility.
Also from the study is that these whales are holding their assets and are not regularly trading on cryptocurrency exchanges; around 60 percent (which is the majority) of these whales are not active traders. This should be a clear explanation of the low percentage level of the transaction activity from whales. This is inferred to mean that they consistently hold 25–40 percent of the circulating supply of ETH and account for only 5-18 percent of transaction volume. The analysis startup used the vector autoregression (VAR) model as well for confirmation regarding prices; that ETH prices follow bitcoin (BTC) prices. This implies that a hypothetical 1 percent increase in BTC price yesterday leads to a 1.1 percent increase in ETH price today. However, the study did not find a direct impact of bitcoin prices on the intraday volatility of ether.
The study concluded on this note “These preliminary findings are consistent with the literature on stock market prices and volatility, Academics have found that large anomalous fluctuations in traded volumes of particular stocks, notably the S&P 500, tend to impact volatility and not price levels.”
This certainly insightful and clears up some popular misconceptions regarding the subject.
Credits- Yogita Khatri, Chainalysis.
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