Two questions about the biggest Dogecoin wallet (DOGE) sparked community doubts and apprehensions on Tuesday (18). The first was about your identity, while the second is about the security of this address.
As per data from BitInfoCharts, this wallet holds the equivalent of $5 billion in DOGE. By way of comparison, the entire cryptocurrency market cap is $21.8 billion. In other words, almost 40% of the total supply is in the hands of a single individual.
According to estimates, the risk of concentration on a single address is extremely high and could ultimately destroy the entire cryptocurrency ecosystem. Also, who will be the mystery holder.
Biggest Dogecoin whale – 23% rule
Currently, there is no specific rule regarding concentration levels of a cryptocurrency. However, a rate of more than 23.17% of the entire offer in the hands of a single portfolio is already an important warning signal.
In the case of DOGE, the situation has an aggravating factor that the share of this mysterious address is increasing. As of May 2021, he had “only” $2.1 billion, or about 28% of the current supply at that time.
A wallet that holds more than 23.17% already has enough money to be attacked. The biggest example of this is a rug pull attack, when the developer of a cryptocurrency sells large amounts on the market, driving its price down.
It doesn’t look like the holder of this wallet is a developer, but it still poses a risk. If only part of that money is thrown into the market, the cryptocurrency could suffer from liquidity problems. As a result, its price could fall irreparably.
“For new cryptocurrencies, if the top 10 wallets hold more than 20% of the token, or worse, a large percentage of the token is held in a single wallet, this is a dangerous sign of a potential pulling of the rug,” a post on reddit.
In the case of DOGE, the top 14 wallets own 46.11% of all cryptocurrencies. Even if there isn’t a rug pull hit by any of them, the risk is substantial, especially since DOGE is essentially a meme cryptocurrency, with no value proposition whatsoever.
Who is the holder?
As worrisome as the risk of this wallet is the identity of its holder. Who will be the mystery investor? Elon Musk, notorious DOGE enthusiast? Any exchanges?
According to the DOGE forums on Reddit, the biggest suspicion was that the Robinhood exchange held the cryptocurrencies. The rumor was started by Tom Robinson, co-founder of Elliptic, who compared dates and came to this conclusion.
“Almost certainly (DOGE’s wallet) belongs to Robinhood. The timing of its creation and the creation of the addresses it received funds from coincides with the timing of Robinhood’s support of Dogecoin,” Robertson told Bloomberg in 2021.
However, the rumor was denied by Christine Brown, COO of Robinhood. At the time, Brown made it clear that the exchange itself did not buy, sell, or conduct any cryptocurrency transactions. But the company said these functions will be released to customers in 2022.
In any case, the risk of the concentration of cryptocurrencies in big players is real and cannot be ignored. Avoid any cryptocurrency that has wallets capable of bringing down the entire project, as this is capable of generating irreparable losses for small investors.