According to the latest report of Chainalysis, one-third of the total circulation of Ethereum in the market is controlled just by 376 people. The report was published on May 15 and showed the extent to which a handful number of people have dominated the circulation of Ethereum in the market. Another interesting revelation by the agency put forward the point that despite holding the majority of Ethereum, these large “whales” are not involved in transactional activities with their share pegging only at 7%. This means the chances of manipulation from the big players are not as high as these whales are not very active participants in transactional volumes involving Ethereum.
That said, the report pointed out that despite being insignificant in affecting the overall price of Ethereum in the market, the big holders are capable of contributing to market volatility especially during the time when a big deal or sell-off happens. What is positive, however, in this new revelation is the fact that the dominance of these big players has reduced from 47% in 2016 to one-third now in 2019. This means various measures taken to reduce the dependability of Ethereum on a handful number of players have worked in the favor of the coin, and now the situation has improved by a decent proportion. Still, experts warn that there is no reason to be complacent as the current figure of around 33% needs to be worked upon and brought down further. The report has also found that around 60% of the big holders do not actively participate in the transaction as they just hold the assets without involving much in the trading or exchange processes.
Bitcoin and Ethereum
Chainalysis also researched the relationship between prices of Bitcoin and Ethereum. The agency concluded that there is a correlation between Bitcoin and Ethereum prices as every 1% increase in the Bitcoin price results in a 1.1% increase in the prices of Ethereum. Chainalysis also shrugged off the concerns put forth by many investors and analysts that “whales” have the capability to impact the prices of the cryptocurrency significantly as data from the research pointed in a different direction. However, the research firm adds a caveat to this observation by stating that fully ruling out the possibility of the possible impact of the big players on prices of Ethereum is also a wrong thing to assume.
Crypto Industry and Frauds
In a related report last month, Chainalysis revealed that out of the total crimes associated with cryptocurrencies, 95% fraud cases which are being investigated are related to Bitcoin. On the request of various law enforcement agencies, Chainalysis has expanded its real-time monitoring tools to include as many as ten cryptocurrencies including Bitcoin and Ethereum among others. The holding dominance of cryptocurrencies by some big players is a contentious issue as the whole concept of cryptocurrency and blockchain technology is based on decentralization. Further, the dominance of “whales” can potentially manipulate the market and change the price, which is not a desirable proposition for both investors and crypto firms.