Ethereum Has More Whales and Some Of Them Manipulate (UPDATED)
There's an influx of new ethereum (ETH) whales, while some of the ETH whales manipulate the market, according to Adam Cochran, Partner at decentralized autonomous organization Metacartel Ventures. (Updated on April 30: updates in bold).
Cochran explains in his first of several announced reports (also 'translated' into a Twitter thread) that he manually audited the top 10,000 Ethereum addresses in order to learn about liquidity, profitability, and market manipulation. Here are some of his findings.
1. There are more new whales in the space, now making c. 6% out of the 10,000 addresses. Among these top wallets, a "significant" number of them had their first transaction associated with fiat onramp exchanges, such as Gemini, Kraken and Coinbase. These new addresses often bought USD 100,000-250,000 worth of ETH, or around USD 100 million in new ETH purchases in the past six months in total. Together with the "old" whales, this number goes up over USD 650 million, Cochran claims. Meanwhile, according to recent multiple reports, based on a Reddit post, Grayscale Ethereum Trust bought around a have of all mined ethers this year.
Per the report, there's first an increase in people shorting ETH, commonly starting on BitFinex, then BitMEX, then other exchanges. These whales start sending equal batch transactions over a few days to Bitfinex, Coinbase, Kraken, Bitstamp, and Bitflyer, make repeated small transactions that wouldn't be noticed by systems like WhaleAlerts, and finally "all at once, the market dumps. They profit on their huge shorts and buy back at a lower price." The batch transactions are then back to their addresses.
75/109— Adam Cochran (@AdamScochran) April 29, 2020
It sometimes takes them more than two weeks to migrate their ETH back, but, its always with a profit. Usually these wallets continue to buy new ETH for 4-6 weeks after their dump. pic.twitter.com/WgnSTrnweJ
"Bitfinex does not collude with its customers to manipulate crypto markets," Stuart Hoegner, General Counsel at Bitfinex, told Cryptonews.com. The company has recently introduced a new surveillance tool, Shimmer, in order to combat market manipulation and other forms of abuse, such as wash trading and layering.
Cryptonews.com has also contacted BitMEX and we'll update the article should they reply.
3. Miners have begun to hoard. In the same time frame, in the past 6 months, miners have accumulated ETH 1.15 million, currently worth around USD 240 million. Only c. 20% of miners are hoarding, but they are doing so "at aggressive levels." What seems likely, however, is that with the Ethereum 2.0 Phase 0 nearing, ETH miners are getting ready to convert mining operations into staking operations, which Cochran says will lower the cost. On the other hand, there are miners who continue to sell heavily, which may mean they won’t be stakers, and it could also mean that some 80% of miners will shift to other Proof-of-Work chains, once Ethereum moves to Proof-of-Stake - and that "could be great for ETH’s little brother ETC." Either way, says Cochran, "profiteering miners are bullish on the future of ETH."
65/109— Adam Cochran (@AdamScochran) April 29, 2020
This is strange because miners have hard costs to cover in their mining operations so they very rarely ever horde any ETH at all.
We've never seen such a rapid increase in miner hording on ETH. Ever. pic.twitter.com/QvsL76x2vV
4. Exchange deposits grew c. 5 times from 11,000 a day to >55,000 a day in the last six months. This tends to be the leading early indicator of a bear market or mass sell-off, Cochran writes, as the last three times such a 4-5x rise happened would indicate. However, this time, ETH's price appreciated despite the volume increase. "There is a major positive sentiment being shown in the market right now," he says.
70/109— Adam Cochran (@AdamScochran) April 29, 2020
Instead, those sell walls got chewed up by whales. Despite the 5x increase in volume, ETH rose in price.
This tells you the remarkable confidence that large investors have in ETH right now. pic.twitter.com/gxXdeZzmP3
At pixel time (12:05 PM UTC), ETH trades at c. USD 207 and is up by 5.5% in a day and 16% in a week. The price also increased by 55% in a month and 30% in a year.