(Bloomberg) —
The unlikely star of the cryptocurrency world in October was Shiba Inu, named after the same breed of dog that inspired the market’s former unlikely meme-coin darling Dogecoin.
The value of the token has tumbled in recent days after surging for most of last month, temporarily leapfrogging over Dogecoin and putting it among the top cryptocurrencies in existence — despite the fact that its provenance as a meme leaves it without much of a fundamental economic reason to thrive.
As the price frenzy reversed in recent days, the crypto world’s attention has been fixated on a “whale” wallet controlling billions of dollars worth of the token. There was unsettling news for all the minnows who bought Shiba Inu and were sitting on paper gains of a lifetime: The whale has been moving the coins into different wallets, raising concern the holder was about to sell.
The dog-coin drama is the latest episode that highlights the fact that, despite an abundance of transparency in a market where every transaction is recorded on a blockchain for the public to see, the anonymity of some of the players involved — including, in this case, even the creators of the coin — leads to a house-of-mirrors effect because no one really knows exactly who is doing what.
“Legitimate crypto is fully transparent about transactions, code and other matters — but is usually opaque about matching transactions to individuals,” Aaron Brown, a crypto investor who also writes for Bloomberg Opinion, said Wednesday. “This is the opposite of the banking system, which is opaque about everything except personal identification.”
The ownership of Shiba Inu has come under scrutiny as the token — known by its ticker SHIB — started flying out of the whale’s wallet at a fast clip.
“It looks like there were four transactions out of that account yesterday, each sending $695 million of SHIB to a different account — so a total of $2.78 billion,” Tom Robinson, co-founder of Elliptic, which does blockchain forensics, said on Wednesday. “Whoever it is purchased the SHIB on Uniswap about a year ago, for not very much.”
As has been widely reported, Ethereum co-founder Vitalik Buterin was given more than half of all Shiba Inu tokens by the token’s anonymous creator, and then took most of them out of circulation by sending them to what’s known as a “burn wallet.”
“Limiting supply, pricing the coin at extremely low decimals, timely Twitter posts and gifting Shiba Inu coins to Ethereum co-founder Vitalik Buterin are part of what captivates speculators,” Bloomberg Intelligence analyst Mike McGlone wrote in an Oct. 29 note. “Shiba Inu presents a unique blend of exploitation, good marketing, ESG, supply vs. demand economics and gambling on an unprecedented 24/7 global scale, and faces reversion worthy of its parabolic rise.”
After surging in price for most of October, Shiba Inu has tumbled in recent days. The coin, each of which trades for tiny fractions of a penny, is currently down about 30% over the last 24 hours and has fallen about 48% from its peak on Oct. 27 to $0.00004546 midday Thursday, according to CoinMarketCap.com
Shiba Inu is not the first coin to trigger concern about high ownership concentration. Initially, Bitcoin and Ethereum were highly influenced by whales whose trades could sway market prices. Their ownership concentration has since declined, as more institutions and retail investors jumped into crypto. That said, even today about 2,000 addresses own more than 40% of all Bitcoin, per BitInfoCharts.
There are many pockets of the crypto market where coin ownership is still highly concentrated. Many of the smaller of the more than 13,500 cryptocurrencies are majority owned by a handful of wallets. In decentralized-finance apps, which create their own tokens to let people trade, lend and borrow from each other, a small percentage of users controls everything. Between 20 and 50 crypto-trading firms “are pushing most of the volume in crypto,” said Antonio Juliano, founder of DeFi exchange dYdX.
“I don’t think it’s so totally different than the way things work in traditional finance,” he said. “Big Wall Street funds push most of the volume.”
Still, a lack of regulation and official market surveillance leaves meme coins like Shiba Inu vulnerable to suspicion even as its surge in price brings it to a broader, mainstream audience. While it’s available for trading on Coinbase’s exchange, others such as Kraken and Robinhood have so far resisted — despite vocal lobbying from their clients.
“Legitimate crypto has a solid underlying economic case, its value does not depend heavily on who holds how much of it,” adds Brown. “But for crypto with no underlying economics — whose value is determined only by speculation — concentrated ownership suggests a rigged game.”
(Updates throughout with background on burned coins, analyst comment and price action. An earlier version of the story removed an inaccurate description of top holders based on CoinMarketCap.com data.)
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