Though cryptocurrencies were introduced to create a decentralized economy, a recent study by Chainalysis revealed that one-third of Ether is being held by only 376 people.
This makes the digital currency of the smart contracts leader more centralized than Bitcoin as only little more than 20 percent of the leading digital asset is controlled by the so-called crypto whales.
According to the New York-based blockchain analytics firm, though, in 2019, a handful of individuals control 33 percent of Ether, the concentration of the coin went down significantly as 47 percent of the same was held by the whales in 2016.
The company defines “whales” as the “the top 500 holders” of cryptocurrency, however, it excluded the custodian services which store huge amount of crypto holdings off the exchanges.
Little impact on the market
Despite the concentration of the cryptocurrency, its impact is limited to the price of the asset. “These whales have no meaningful impact on the price of Ether; they do, however, make the market more volatile on a daily basis with their large sell-offs,” the company explained.
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The study elaborated that the whales largely hold the digital currency and account for between 5 to 8 percent of economic transaction volume of Ether.
Furthermore, market data collected from 2016 to 2019 revealed that the value of Ether tends to follow the price movement of Bitcoin. “On average, a 1% increase in Bitcoin prices yesterday leads to a 1.1% increase in Ether prices today,” Chainalysis stated.
However, the movement of funds by these whales impact the intraday volatility of the market.
“On average, a whale that sends 1 million USD worth of ether two days ago leads to a 0.1 unit increase in intraday volatility today, which is relatively small considering values of intraday volatility range from 0.02 minimum to 417 maximum,” the analytics company added.
Recently, the former CTO of TRON revealed that the project has deviated from the principles of decentralization and its voting process is being controlled by a handful of people.
“We cannot rule out the possibility that whales can impact price changes within single days based on outlier events,” Chainalysis concluded.