The crypto market is hot right now, and rocketing coin prices are raising the stakes for new whale investors who are aiming to get a piece of decentralized finance (DeFi) by buying ethereum (ETH), according to blockchain analytics firm Chainalysis.
According to the latest analysis by Philip Gradwell, Chief Economist at Chainalysis, a lot of people are now entering “the crypto casino”, and this movement could be sustainable for a longer time, especially considering that the market has significantly more functioning applications and use cases than in 2017.
“I believe it is now a question of when, not if, this [widespread digitization of assets] happens,” he wrote. Despite that, it should occur only after the current hype wanes, he concluded, adding that “if you are not playing a very long game in crypto, you probably should be playing a very short game.”
Gradwell also argues that the recent accumulation of ETH has been driven by “big new players who have brought a lot of assets to the casino.” Per Chainalysis data, ETH 53.3m, equivalent to 46% of the total supply, is being held in non-custodial wallets that hold more than ETH 10,000. Since November 2020, this group of whales have increased their holdings by ETH 7m and have been the main recent accumulators.
Also, fresh Ethereum whales who have entered the market in the last six months have accumulated coins, increasing their total holdings by ETH 6.3m, while longer-term whales that have been active in 2017 and earlier have reduced their holdings by ETH 800,000 coins in the last six months.
Moreover, the buying pressure that drove ETH to USD 4,000 and above is coming from DeFi, as approximately ETH 10m entered DeFi wallets since May 2020. These new Ethereum whales seem to be actively engaged in DeFi services. Nevertheless, Gradwell concluded that it is still too early to answer the question if they are playing the long game of technology adoption or are merely participating in short-term hype:
“To me it feels like Fear Of Missing Out is taking hold and sentiment is going to drive the market for a while. But will the scale of investment and interest advance technology and adoption enough to sustain prices, before hype wanes and Fear Of Missing Out turns into Fear Uncertainty and Doubt? As ever in crypto, that is the question!”