A third of all ether, ethereum’s native cryptocurrency, is owned by just 376 whales as of May 1, new research indicates.
Blockchain analysis startup Chainalysis published a study on Wednesday, indicating that, while these 376 individuals control 33 percent of the circulating supply in 2019, that number is actually down from levels seen in 2016 and 2017.
The study also found these whales have “no meaningful” impact on the ETH price, but they do increase intraday volatility in the cryptocurrency market when they make large sell-offs.
Chainalysis defines whales as the top 500 holders of cryptocurrency, excluding services, who store their holdings off exchanges. It found that ether whales currently account for just 7 percent of all transaction activity.
The study further found that the majority (around 60 percent) of these whales are not active traders, meaning they are holding their assets and are not regularly trading on cryptocurrency exchanges.
That means they consistently hold 25–40 percent of the circulating supply of ETH and account for only 5-18 percent of transaction volume, Chainalysis said.
Further, using a vector autoregression (VAR) model, commonly used in financial time series analysis, Chainalysis found that ETH prices follow bitcoin (BTC) prices. That is, on average, a 1 percent increase in BTC price yesterday leads to a 1.1 percent increase in ETH price today. The study, however, did not find a “statistically significant” impact of BTC prices on ETH’s intraday volatility.
The study also analyzed the impact of whales sending and receiving funds to and from exchanges using a VAR model. It found that funds sent do impact volatility but not price, while funds received have no impact either on prices or intraday volatility.
“These preliminary findings are consistent with the literature on stock market prices and volatility,” Chainalysis concluded. “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.”
Ethereum (ETH) Might Retest $280 But Long Term Outlook Remains Bearish
Although quite unlikely, it is possible that ETH/USD might test the $280 level again and even rally towards $300 before beginning its next decline. That being said, it is not a good idea to take that trade as the risk/reward is definitely not worth it. The 4H chart for ETH/USD shows that the price is trading within a descending channel and an ascending triangle at the same time. The perfect scenario for the whales if they can pull it off would be to pump the price above the ascending triangle first to trap in retail bulls and hunt the bears. Then they would pull it back into the descending channel to trap the bulls. At every trading setup, the market maker is looking for ways to take advantage of retail traders especially around turning points.
This is why most traders believe in going with the flow although going with the flow in this market could mean being a dead fish at certain times. The ideal play here would be to wait for a break out and see if price enters the descending channel. There is no doubt whatsoever that ETH/USD is long overdue for a sharp retracement and at some point that will happen. However that move is more likely to come at a point when both the bulls and the bears least expect it just like the recent rally. A lot of bulls feel very euphoric at the moment but most of them did not see the current rally coming. A lot of people on both sides were taken by surprise when Ethereum (ETH) pumped in that manner. Now, instead of being worried, most of them just got onboard and forget about their opinions before that pump. Some ‘reputed’ traders even took a 180 degrees turn like nothing had happened.
Ethereum (ETH) shorts are still struggling as retail bears fear a rally to $300. Considering what they have seen in the past few weeks, it is reasonable to see that most of them are too scared to take a trade at this point even if the risk/reward is worth it. ETHUSDShorts has been struggling to break past the 50 day moving average but it has yet to succeed. The number of margined shorts could rise towards the top of the channel as early as next month as sell pressure on ETH/USD mounts. The market is not short of catalysts that could trigger Ethereum (ETH)’s next decline at this point.
As mentioned in our last analysis on ETH/USD, there is a strong bearish divergence on the weekly time frame that points to massive downside ahead. One thing to note here is that traders that are patient always see the price coming to them instead of them chasing the price. When BTC/USD fell to $6,000 a lot of people FOMO’ed into the market thinking this was it, but that was not it. Not as many people FOMO’ed in the $3,000s but they did soon afterwards. Either way, this is not the bottom. When ETH/USD bottoms, we will see more of “Ethereum (ETH) is a scam” and “Ethereum is going to zero”. At that point most of these overly excited retail bulls would want nothing to do with Ethereum (ETH) or any other cryptocurrencies.
Ethereum Foundation announces how its spending $30 mln to develop network
The Ethereum Foundation announced in a recent blogpost on May 21, their plan for spending $30 million to develop the Ethereum network further over the next year.
The $30 million being spent is going to be allocated for three different categories. $19 million is set to be spent on future projects, $8 million is set to be spent on current projects, and $3 million is set to be spent on developer support.
The bulk of the $30 million, which is set to be spent on future projects, is set to include various projects to scale the network. These projects have been dubbed Ethereum 2.0 projects and include client teams, research, documentation and communication, and layer 2 projects like Plasma.
Plasma is set to enable “the blockchain to be able to represent a significant amount of decentralized financial applications worldwide,“ according to the blogpost. The first mention of Plasma was proposed by Vitalik Buterin and Joseph Poon in 2017.
The blogpost also laid out the main reason to scale the platform over the next year in the blogpost:
“Ethereum is used in production today to secure billions of dollars of assets and as a base layer for many hundreds of live applications. We believe that it is vital to continue supporting these efforts to ensure that “Ethereum 1.0” continues to be the world’s dominant smart-contract platform.”
Ethereum transactions have risen 44% in just 3 months
It is being reported by LongHash that transactions on the Ethereum network have been on the rise lately, and have recently seen a new high that is 44% above where it was only 3 months ago.
When looking at a chart outlining network transactions from February 19th to May 19th we can see that, although there was a slight dip after, the total reached a new high of 735,400 tx/day. Seeing as that number was only 512,460 three months prior, this constitutes a 44% rise in the daily number of transactions using Ethereum.
In addition, the total amount of Gas being used to power the network every day has risen from 31 billion to 48 billion in the same timeframe.
Reasons for this almost certainly include an influx of users, but also an ongoing evolution of smart contracts. Since complex smart contracts can consume more Gas and perform more transactions, hypothetically, then it is likely that what is being seen here is generally more users interracting with increasingly complex dApps.
All of this is rather bullish for Ethereum in the long run. If these numbers can continue to grow, then perhaps soon Ethereum can become the global computer it has been positioning itself to be for years now. Stick with Chepicap for all Ethereum updates!