Whales still dominate many of cryptocurrencies, especially Litecoin and ERC20 tokens
According to analysis from Clovr, the wealth distribution among 140,000 non-exchange addresses from four significant cryptocurrencies and the 100 most valuable Ethereum tokens has an exciting finding. Surprisingly, fewer accounts are needed to form majority ownership of multiple currencies, and some currencies have an uneven distribution of assets compared to 2018. Also, whales are controlling cryptocurrency Litecoin and many Ethereum tokens.
The majority of coins are in cryptocurrency whales wallet
To find an approximate approximation of the whale, the study removed all addresses owned by an exchange. In particular, many addresses are belonging to four exchanges using wallet nicknames associated with each address. The research then investigated the distribution of assets of Bitcoin, Ether, Bitcoin Cash, and Litecoin. They found that Litecoin had the most centralized wealth. Just 189 addresses are enough to own most of LTC. The ten most productive Litecoin accounts own one-tenth of all LTC assets.
Litecoin is the cryptocurrency with the most uneven distribution of assets among the four types of cryptocurrencies mentioned above. However, Ether is a cryptocurrency that has seen its wealth inequality rise significantly since 2018. Data shows that Ether’s asset inequality has increased by 13% between 2018 and 2019. BTC has low asset inequality in most of the four major cryptocurrencies. Bitcoin Cash is the next name after Bitcoin.
When the liquidity of a cryptocurrency is lower, and volatility is higher, whales can create bigger waves. Centralized property ownership creates serious failure points in a robustly designed system through decentralization. The bigger the whale, the bigger the target, the hacker, and the scammers will easily find victims.
Many whales are also controlling the ERC20 token
ERC20 tokens often exhibit a lot of inequality. Among the 100 Ethereum tokens with the highest market capitalization, the average number of addresses accounts for a majority of 34. However, the size of the majority group varied widely from token to token. 24 of the 100 most abundant tokens are owned by the majority of an address, almost always the founder.
This inequality is often caused by the control of a large amount of the founder’s token. But such concentrated wealth brings unpredictable risks. ICOs are used to fund several tokens identified as pump and dump scams, enticing investments that increase the value of the token, only for founders withdraw cash with a large amount of tokens they have kept.
However, according to research, the distribution of wealth in tokens or coins can mean different things depending on how the currency originated. According to the analysis, Huobi Token (HT) of Huobi has the highest asset inequality of all ERC20 tokens. However, HT is not funded through the initial coin offering and, therefore, may not put investors at risk.
To help understand which tokens are potentially very unequal in the distribution of assets – an indication that a market can be easily dominated by a few individuals or manipulated by its founders. A top massive asset distribution would be one in which a large number of assets are held by a handful of addresses – defined here by the log ratio of average address wealth to wealth.
The higher the token’s market cap, the higher the ability to distribute the wealth compared to other tokens. In other words, the tokens that show the most significant asset concentration among the few addresses are all tokens with a relatively small market cap – in fact, $ 100 million or less.
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