As the bear market drags on, it seems that some large crypto holders may be doubling down on their bets. New research from Diar, with data from TokenAnalyst, has found that in this year alone, active Ethereum (ETH) whales have increased their holdings from 11 million ETH ($1.2 billion) all the way up to 20 million ETH ($2.2 billion). This makes up roughly 20% of ETH’s circulating supply, which is currently about 104 million ETH. These same wallets only held 4.3 million ETH at the beginning of 2017, as shown in the chart below:
In addition, whale holdings have consolidated. Diar explains that: “There are now fewer whale addresses than the start of the year, a drop of nearly 30%.” What is the cause of this increase in whale holdings? There are a few possibilities for why this is happening, according to the report.
The first is that the wallets are held by exchanges. As holders start selling their ETH, the exchanges start accumulating the tokens other people are selling. As ETH’s price has spiralled down to double digit territory, it’s likely that many traders are exiting their ETH positions.
Secondly, this increase in whale holdings could be a diversification away from tokens. Most initial coin offerings (ICOs) raise funds in the form of ETH, and many ICOs lock up tokens for a specified vesting period. As ICO participants receive their ICO tokens (which they paid for with ETH), they could be selling their ICO shares and buying back into ETH.
At the same time, ICO projects could be dumping their ETH for USD in order to keep the lights on. Many projects that raised funds when ETH was trading above $1,000 have had severe budget issues if they held onto ETH until now. As ICO teams come to the reality that is the bear market, it’s possible many are selling ETH to pay the bills.
Curiously, BitMEX research has earlier this year showed that ICOs have sold "almost all" of the ETH they raised during the bullrun, and are now sitting on "unrealized gains," as they sold the cryptocurrency above current market prices.
The last possible explanation is that ETH believers are loading up. It’s not clear who these ETH whales are, but if they believe in it enough to hold millions of tokens, they’re probably frothing at the mouth to buy ETH at these prices. Even if ETH only returns to its previous all-time high of $1400, that’s still a 14x ROI from these levels.