Crypto whales are mostly said to be wealthy individual traders with the capabilities to move the market with a single sell order. However, this is not the case when it comes to Ether, as ICOs hold about 3 percent of the total Ethereum supply, worth billions of dollars. There are fears that if these projects cash out, the market is likely to experience havoc or a crash, as has happened before.
On Sunday, while the cryptocurrency market was undergoing unexpected turmoil, Ethereum went from bad to worse, falling from $516 to $460 in two hours. Prior to this nosedive, it had been one of the most stable coins compared towith other altcoins, which have mostly endured huge losses. The loss made Ethereum one of the worst-performing coins among the top 100 on Monday, with its value enduring a 16% dip. This huge tumble was attributed to one of last year’s ICOs offloading a huge amount of its Ethereum reserves. If this is the case, it’s not the first time that this is happening and it definitelywon’t be the last.
Comprehending the amount of Ethereum that has been invested in ICOs is simple. About two thirds of the $5.7 billion realized through crowd sales in 2017 was in Ether form. The projects have a right to occasionally cash out their holdings for fiat currency, in order to meet their expenses which cannot be paid using crypto. When they do it, it’s mostly in large quantities, and this leads to a sudden dump of Ethereum.
The Whale Fear Factor
Cryptocurrency markets have less liquidity compared with traditional financial markets. If thousands of Ether are sold on the open market through an exchange platform, prices instantly go down. Traders are ever-alert to even the slightest signs of market movement and the thought of an upcoming dump can cause havoc in the entire crypto market. Bitcoin News reports that this was the case on Sunday, after fears flooded the market that Mt. Gox was about to dump BTC en masse, leading to market chaos.
Prior to the massive Ethereum nosedive, EOS had moved about 50,000 ETH to a Bitfinex address. While it’s hard to determine when an enterprise offloads the funds moved to an exchange’s address, the movement is an indication of sell intent. Traders closely monitor the contribution addresses of major ICOs, and whenever a crowd sale transfers massive amounts of ETH to an exchange, it’s quickly interpreted as a sell intent, which quickly deflates the prices in the market.
Ethereum is the preferred fundraising platform for ICOs, and it is expected that the cryptocurrency will remain concentrated in the hands of few projects, which can offload to the market any time, this triggering havoc in the entire crypto market.
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