Altcoins, of late, have become a bit of a deflating balloon. There was much hype and excitement around them at the start of 2018, but it has been mostly downhill from there. It could be the Bitcoin dominance or a generally slower market, but what has been registered is that the more successful coins often have a high concentration level of token distribution, meaning big Whales.
This fact may not be altogether that surprising as altcoins, as a collective, make up a small percentage of the entire cryptocurrency market, and when their percentage is divided by the hundreds of coins out there, a few big Whales would not be hard to find.
More so, the success being tied to the Whales is also not that surprising as these big spenders will be able to impact and affect their coin’s market significantly, and they will have an almost centralized role to play in its success.
Data from Longhash looks into this phenomenon and provides some interesting reading.
“Among the tokens we analyzed, we found 12 with a market value over $100 million, 81 between $10 million and $100 million, and 813 tokens with under $10 million in market cap,” their analysis read.
“From the perspective of return rate, more than half of the tokens have shown a negative return rate, while just 38 tokens had an ROI of over 500%.
“Most of those 38 tokens with phenomenal returns have a rather high concentration level of token distribution. In fact, for most, this level is beyond 60%, with some even exceeding 90%, meaning that 60% to 90% of the total token value is held in the top 20 addresses.”
The conclusion that Longhash reached with its data-driven investigation was that coins with a market value of less than $10 million, that is to be said, smaller level coins, often see better ROI when they have a more concentrated – or centralized – collection of tokens.
Conversely, the same cannot be said about bigger coins, which leans on the theory that decentralization in coins is important, as long as those coins are of value and use. For instance, one of Bitcoin’s redeeming features as a popular coin is its distribution and decentralization, which helps increase its ROI.
For smaller coins, being well distributed, but lacking in value, market cap, use, and adoption, can see such coins struggle to pull in good returns without the help of major Whales.