Bitcoin whales and Ethereum whales are not the same

This week, observers have spotted a stark contrast between the market’s two top cryptocurrencies’ largest holders, highlighting seemingly opposing sentiments between Bitcoin and Ethereum whales. According to on-chain analytics firm Glassnode, Ethereum whales holding 1,000 or more ETH (worth about $1.5 million) have been on a steep downward trend since 2020, with $20 million in ETH being sold.

Bitcoin whales, on the other hand, have been quietly accumulating. Those holding 1,000 or more BTC (about $26.9 million) have remained largely flat over the same period, despite a few sharp dips, which could have been caused by the FTX crash or profit-taking after the successful 2021 bull run.

The apparent discrepancy in whale activity led to a flurry of theories shared on social media, with prominent figures in the Bitcoin space seizing the opportunity to take shots at their counterparts in the Ethereum community.

Steven Lubka, head of private client services at Bitcoin financial services Swan, noted that his company has seen a large number of high net worth individuals (HNWI) looking to swap ETH for BTC. He first pointed out the legal issues surrounding the industry.

“Ethereum faces regulatory pressure, while Bitcoin does not,” he said.

His voice resonated with Jesse Shrader, CEO and co-founder of Lightning Network data analytics company Amboss.

“Bitcoin provides a simple function: better money,” Shrader said. On the other hand, “while Ethereum offers fascinating complexity, it risks losing control due to smart contracts and critical hard fork protocol changes.”

But Glassnode's data and the conclusions it draws seem incomplete.

“Is the chart correctly adjusted for staking?” asked Kunal Goel, senior research analyst at Messari. He explained that “moves to staking contracts may look like an on-chain sell-off, but it’s not a real sell-off at all.”

Currently, staking in the Ethereum network requires users to lock (or stake) 32 ETH in a smart contract to help the blockchain validate transactions. This appears to be one of the reasons why large entities are reducing their holdings.

Goel added that while the huge disparity in dollar amounts between large holders does not prevent whales from being compared, “the data needs to be correct.”

André Dragosch, head of research at crypto asset manager Deutsche Digital Assets (DDA), echoed Goel’s sentiments, calling the selling by Ethereum’s biggest holders “irrelevant” and noting that the percentage of ETH supply held in smart contracts has been increasing “in sync.”

He stressed on Twitter that Glassnode does not include Ethereum tied up in smart contracts in its previously mentioned large holder supply metric. In fact, Dragosch added that the percentage of Ethereum supply held by the top 1% of addresses has not decreased at all.

At first glance, the numbers appear to indicate one thing, but they actually tell a different story: Bitcoin and Ethereum whales continue to be bullish.