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According to a report by the cryptocurrency research firm Coin Metrics and reported by Bloomberg, the large Bitcoin whales including crypto exchanges such as the Malta-based Binance and Hong Kong-based Bitfinex, own almost a fifth of the largest cryptocurrency, Tether (USDT).
The report also showed only 318 addresses own almost $1 million worth (almost 80%) of all Tether digital coins, the token that serves as a channel for trading in many of the world’s largest cryptocurrency exchanges (including in AllStocks crypto exchange). The major holders of Tether include brokers that deal with high-frequency traders and Chinese investors.
According to the finance professor John Griffin, the cryptocurrency space is very concentrated, with USDT being controlled by only a few people. He said that regardless of Bitcoin(BTC)trade being fairly distributed among its users, it is a possibility for the whales to alter the Bitcoin price if they wish so. It also shows that several cryptocurrency exchange owners have a vested interest in keeping the Tether game up. Griffin said:
“The concentration of Tether suggests that control of Tether is in the hands of a few central players who can swing Bitcoin prices, and have a vested interest in doing so.”
Griffin has linked the stablecoin to manipulation of the crypto market and the surge in Bitcoin’s price in 2017, about which Tether its sister company Bitfinex are being investigated by the US Justice Department. The infamous crash of the cryptocurrency market in early 2018 has been subject to controversy. Allegations had been made regarding some powerful entities controlling the prices and orchestrating or causing the bear market for their gains.
Cryptocurrency Concentration that Leads to Volatility
According to BitInfoCharts, more than 20,000 Bitcoin addresses have balances of at least $1 million in equivalent virtual assets. These addresses were observed on the OMNI and Ethereum blockchains. Tether is used on several small digital ledgers as well so an individual might have ownership of multiple addresses causing even more concentration.
Sid Shekhar, the co-founder of TokenAnalyst, also shared the market’s concerns over volatility that is caused due to injecting of a large sum of USDT into the market. The high ownership concentration of the cryptocurrency market makes it even more volatile. According Cambridge, Massachusetts-based Coin Metrics, Tether was used in 40% and 80% of all transactions on the crypto exchanges Binance and Huobi respectively.
Tether has always been subject to controversies since its introduction in 2015. New York’s attorney general has also accused the companies behind Tether of hiding losses and mingling client and corporate funds. After the release of this report, the founders of companies and the exchanges involved are being called the ‘Tether Mafia’ on social media.