Ethereum Whales Gobble 70% of ETH

Ethereum whales, a term for large holders of the digital asset, have increased their holdings of ether to numbers not seen since the height of the initial coin offering bubble of 2017. However, in 2021, these whales are an entirely different […]

article-image

Source: Shutterstock

share

key takeaways

  • Institutional investors are increasing ETH 2.0 staking collateral, while Grayscale increases size of its ethereum trust
  • A new ETH network upgrade slated for summer could make more favorable market for small holders

Ethereum whales, a term for large holders of the digital asset, have increased their holdings of ether to numbers not seen since the height of the initial coin offering bubble of 2017. However, in 2021, these whales are an entirely different species: institutional investors.

According to a report by digital assets analytics firm Santiment, whales, which it defines as holders of 10,000 or more ETH, now control approximately 70% of the total supply of ETH in existence.

Loading Tweet..

Unlike in 2017, when this level of holdings was caused by the ICO bubble, one of the reasons for the expansion of the whale bracket of asset holders is the popularity of staking ETH 2.0 by institutional investors who use it as a bond-like investment vehicle

ETH early days

“I think it’s still early days, but I do see the potential for institutions to start getting turned on to staking like a kind of positive carry trade,” Joel Kruger, a currency strategist at LMAX Digital, told Blockworks. “As institutional players become more comfortable and confident in these models, and the right infrastructure is set up to support the size of such investment, we could see the economics of staking act like a positive carry.”

Gary Pike, a sales director digital asset firm B2C2, foresees a day in the near future when custodians, such as major banks, would then not charge for custody but could create yield-bearing crypto asset products similar to repo, bond and other interest rate vehicles often found in traditional markets.

Grayscale’s Ethereum Trust, set up in a similar fashion to its bitcoin trust, has also been upping its holdings during the last week. Data from ByBt shows that the company added 138,361 ETH to its treasury in the last month, worth approximately $244 million. According to 13F filings by fund managers, the ethereum trust isn’t as widely held as its bitcoin counterpart but holdings have picked up since the last filing period.

ETH 2.0

EIP-1559, a green-lit proposal by the ethereum community, set to go live this summer will replace the auction system with something akin to rent control on gas fees, and could impact existing whales. Gas fees are the way that miners, which run the critical nodes on the network, monetize their infrastructure. 

With the rise of DeFi, the network has become quite congested over the past year, pushing gas fees to the stratosphere and making the transmission of ETH non-economical for most aside from the largest token holders (a.k.a. whales).

Pat LaVecchia, CEO of Oasis Pro Markets, a regulated digital assets exchange, argues that some smaller holders are being squeezed out of ETH by the high transaction fees but the upcoming EIP-1559 (EIP is short for Ethereum Improvement Proposal) network upgrade might change things.

“These implementations and the potential for lower gas fees could bring tremendous upside potential to the ETH price over time, reducing the percentage of whales who are holding, and increasing the amount of ETH holders overall,” he said. 

However, all this could be rendered meaningless once the transition to ETH 2.0 is complete. The new protocol uses something called proof-of-stake, which creates nodes out of large token holders (whales) as opposed to proof-of-work, where miners with their large processing power call the shots.

If anything this might create a new species of whale that has a stake in the network’s longevity instead of miners that want to capitalize on spikes in demand.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

AERODROME TEMPLATE.png

Research

Aerodrome is a "MetaDEX" that combines elements of various DEX primitives such as Uniswap V2 and V3, Curve, Convex, and Votium. Since its launch on Base, it has become the largest protocol by TVL with more than $495B in value locked, doubling Uniswap's Base deployment.

article-image

The former Valkyrie CEO chats with Blockworks about what she has her eye on as Cypherpunk Holdings’ new leader

article-image

Thursday’s CPI report shows prices are coming down more quickly than analysts had anticipated, renewing hope that central bankers will cut rates in the fall

article-image

If we tokenize all assets in a speculative rush, the risk of creating illiquid markets and trapped value will manifest on a large scale

article-image

Plus, Trump is headed to the heart of Bitcoinlandia with a speaking appearance at the Bitcoin 2024 conference

article-image

Meanwhile, stocks rally after Jerome Powell finishes his Capitol Hill tour

article-image

Plus, Blinks have reshaped many people’s understanding of what blockchains are capable of