The weight of whales in crypto decentralization

A few weeks ago, Coin Kickoff published the results of an analysis conducted by its researchers on the 200 largest crypto asserts on the market, specifically examining the weight of whales. 

In this case, “whales” refers to individual investors who own 1% or more of the total supply of a given crypto. 

Such investors play a huge role in influencing its value, partly because smaller investors track whale movements and use it as an indicator of possible price changes.

In particular, Coin Kickoff researchers found that for 36 of the 50 largest crypto assets by market capitalization, whales collectively hold more than half of the tokens, with as many as 13 coins having more than 90% of the tokens in their hands. 

Crypto assets dominated by whales

In this respect, the most whale-dominated token turns out to be UNUS SED LEO (LEO), or the Bitfinex exchange token, with 98.95% of the tokens belonging to only two people. 

The cause of this very peculiar situation might be the buyback combined with the burn as a result of the May 2019 lawsuit. 

In fact, after the token was launched on the market, the exchange’s parent company (iFinex) launched a buyback campaign, raising $1 billion.

In second place in this particular ranking is Huobi BTC (HBTC), with 97.49% of the tokens in whale hands, and in third place is Tether Gold (XAUT) with 97.16%. 

Note that not only are there as many as 13 crypto assets, among the top 50, to have at least 90% of the tokens in whale hands, but that there are almost half of them (23) with 70% of the tokens in whale hands. 

Prominent among them are Axie Infinity (AXS) with 94.88%, Gemini Dollar (GUSD) with 92.17%, FTX (FTT) with 91.2% and Cronos (CRO) with 91.49%. 

There’s also Curve DAO (CRV) with 82.76%, The Sandbox (SAND) with 78.98%, and Polygon (MATIC) with 71.15%. They are followed by Shiba Inu (SHIB) with 68.87%, True USD (TUSD) with 67.77%, and the wrapped tokens SETH and WBTC. 

Among the 36 crypto assets whose majority of tokens are in the hands of whales also appear to be AAVE, Chainlink (LINK), Uniswap (UNI), and Maker (MKR). 

Instead, paradoxically, the most distributed one is precisely Bitcoin, with only 1.15% of tokens in whale hands. This is due to the specific definition given to the word “whale” by this research, namely those who own at least 1% of the entire supply. 

Bitcoin turned out to have only one whale, Satoshi Nakamoto, who precisely alone owns “only” 1.15% of all existing BTC. Moreover, Satoshi has never used or moved those BTC, and many believe he is dead. 

As for ETH, Whales owns 22.25% of the supply, which is a much higher percentage than Bitcoin. Also under 30% are Dash, Litecoin, USDC and USDT, while DAI and Bitcoin Cash (BCH) are under 40%. 

Bitcoin is the most decentralized

While the most interesting finding is certainly that the vast majority of cryptocurrencies are dominated by whales, the second most interesting finding is that Bitcoin is clearly the least concentrated of all of them. 

It is enough to say that it is the only one under 5% (actually, under 2%), while the second-largest is Dash with 8%. Dash, however, is now a project that seems to be fading away, while Bitcoin continues to dominate unchallenged. 

What’s more, only BTC and DASH are below 10%, because the third in the ranking, ApeCoin (APE) already has 11.46% of the whale-owned tokens. 

Thus, the concentration of Bitcoin in the hands of whales is almost seven times lower than the second least concentrated cryptocurrency, and even almost ten times lower than the third. 

Compared to Ethereum then the distance is abysmal, with a difference of more than 19 times. 

That Bitcoin was by far the most decentralized cryptocurrency was already known, but that it was even that much more so in terms of token concentration was not known at all. 

On the contrary, many argued that Bitcoin could be considered a cryptocurrency with a high concentration of tokens, but this data completely debunks that argument, in fact overturning it. 

The risks of concentration

The more tokens a whale owns, the more it can affect the market price by, for example, selling huge quantities of them quickly. 

In particular, those who own more than 1% of all existing tokens of a given crypto can rather easily have a significant impact on the markets. 

Truth be told, in cases such as LEO, when the whales are the same issuers who have withdrawn tokens from the market, the risk is lower, because they could also harm themselves by selling en masse. 

But if the whales are many, and they don’t relate to those who manage the token, the risk is more than real. Indeed, it has most likely happened many times before that the price of a crypto has even imploded after massive sales by whales. 

Even on cryptocurrencies such as Ethereum (ETH), where in total whales own less than a quarter of the total tokens, there could still be a major negative impact on the price if they decided to sell. 

Instead since probably the only big whale in Bitcoin is dead, this risk on the price of BTC seems not to be there. 

However, it must not be forgotten that there are also other smaller whales that own less than 1% of the tokens and could have an impact on the price, albeit a hugely smaller one. 

Nor should one forget that mass sales by small or medium-sized holders could still have similar effects if they were made at about the same time.