A significant competitor in the cryptocurrency world, purportedly the whale who got the biggest payout from the liquidation of Genesis Trading last August, has sold a substantial amount of their Ethereum (ETH) holdings in the past two days.
This huge transaction is perplexing to market analysts, as the individual or institution behind the sale offloaded 40,000 ETH valued at $89.2 million through over-the-counter (OTC) brokers. The funds were divided between Galaxy Digital and FalconX, two well-known firms in the crypto finance world, which has sparked some worries over potential market volatility.
This whale was compensated with a staggering 114,500 ETH ($358.19 million) from the liquidation that followed Genesis Trading’s bankruptcy. The address was the largest recipient of ETH from that event, and at the time of the compensation, the ETH was worth $3,128 apiece.
Now Ethereum is worth only about $2,203, and the value of that whale’s compensation has dropped by a stunning $110 million. And what is this whale doing with the now even less valuable ETH? Why, it’s capitalizing on liquidity.
Big Movements: ETH Sold to Galaxy Digital and FalconX
For the last two days, this whale’s address has been making big moves with some substantial transfers of ETH. Substantial as in 30,000 ETH sent to Galaxy Digital and 10,000 ETH sent to FalconX. Both of these transfers have been executed through brokered OTC deals, which is a typical way for big players to do their business when they want to avoid rocking the price of an asset too much. ‘Whale watch’ moment concluded. Keep doing what you’re doing, Galaxy.
After these transfers of ETH, the whale receives (1) $20 million in USDC from Galaxy Digital and (2) an additional $19.49 million from FalconX. These funds, almost certainly part of a structured deal to inject liquidity into the whale’s crypto portfolio, now allow him to make more moves in this ongoing, highly speculative market with some sort of assurance that he’ll be able to access cash in a pinch. It’s almost as if the whale is repricing its assets in something other than ETH.
This transfer denotes a major change, given that the whale had kept a significant part of the 114,500-ETH payment from the Genesis Trading liquidation for a handful of months. When the payment was made, ETH’s price was around $3,128 per token, which allowed the recipient to pile up a large sum that is now reduced to something closer to a third of the value with which it originally entered the space. Meanwhile, the whales keep on swimming.
Although the whale has probably already secured some profits from the first sale, the drop in ETH’s market value means that their remaining holdings are now worth a lot less than when they got paid.
Impact of the Transaction on the Ethereum Market
Selling 40,000 ETH in such a brief time raises concerns over the possible effects on the larger Ethereum marketplace. But the $82 million worth of OTC sales to brokers like Galaxy Digital and FalconX means that the transactions have been pretty much invisible on public exchanges. Still, the volume of ETH in play feels like it should have some kind of impact, if only to influence sentiment.
The cryptocurrency market is under close watch whenever one of its more prominent entities so much as sneezes. One reason for this is that the market is still relatively small and, as a consequence, susceptible to even a few large players moving around their assets. A sell-off of several hundred million dollars’ worth of Ethereum, especially prompted by an entity receiving a huge liquidation payout, could easily give pause to other market participants. Why would one of Bitcoin’s (or Ethereum’s) top treasury-holders not opt instead for an intermediate currency like USDC?
To most market participants, when whales sell in volume, it is taken as a sign that they are not too bullish on the asset and are perhaps looking for a better entry point. It also increases bearish sentiment, in general, for Ethereum. With Ethereum already having sold off to around 30% off of its peak in 2022, this latest sale by top Ethereum holders could instigate even more ETH holders to panic sell, thus creating a short-term rise in volatility.
In addition, as an increasing amount of the whale’s ETH is exchanged for stablecoins such as USDC, one must ask whether the holder is getting ready to reinvest or is trying to protect against an ETH price drop that might occur in the near future. These stablecoin liquidity events may also just be the whale (or whomever) diversifying across asset classes and preparing to either A) purchase more ETH at a lower price point or B) purchase other assets.
Genesis Trading Liquidation and Long-Term Outlook
The whale’s actions similarly remind us of the ongoing and far-reaching effects of the Genesis Trading bankruptcy. This situation occurred in the aftermath of the collapse of several major crypto firms in late 2022. Left in the wake of these happenings was a number of creditors and investors who were just knocked silly by the long series of events. They were really reeling from all these events. But when you look at it in totality, our whale is simply the biggest fish in a pond that was all liquidated.
Ethereum’s future is still uncertain, with the market traversing a tough macroeconomic stage. Investor sentiment is weighed down by concerns over regulation, inflation, and the general volatility of the financial markets. The price of ETH has had a rough time holding up any sort of bullish momentum, especially after we all got euphoric over Ethereum’s transition to a proof-of-stake (PoS) mechanism. The whale’s decision to liquidate part of their ETH holdings could, however, be a sign of something much murkier. Uncertainty seems to be the name of the game right now, as big institutions and large holders of crypto reassess their positions amidst an increasingly fluctuating and volatile crypto market.
Looking Forward
Even though this recent sell-off has created some short-term turbulence, we feel the long-term outlook for Ethereum is still relatively bright. It’s driven by three main factors: 1. The developer ecosystem is very strong. 2. Adoption by institutions and corporates is really growing, especially in DeFi, but also in NFTs. 3. The Ethereum network is undergoing a series of major, mostly positive upgrades. Even so, the price of ETH is being impacted in real time by the actions of whales and other big players. We’re watching this very closely.
Disclosure: This is not trading or investment advice. Always do your research before buying any Metaverse crypto coins.