A Tezos whale in hiding: Looking at a recent jump in XTZ circulating supply

Yesterday, we spotted an anomaly in the supply curve of Tezos. On Jan. 29, almost 9 million new XTZ (about 1.3% of the reported supply at the time) entered into the circulating supply. Since the annual issuance rate of Tezos sits around 5.5% (with small variations in either direction), this significant bump in supply raised some questions as to its origins.

Link to chart

While the Tezos Foundation owns the rights to over 76 million XTZ, its allocation vests monthly over the first four years following the network’s launch. These periodic releases are too small for a one-time movement of this magnitude, and our research suggests that this supply jump does not have ties to a Foundation address.

Instead, these tokens presumably belonged to an entity that finally claimed the XTZ they purchased during Tezos’ 2017 token sale. When Tezos launched in Jun. 2018, token sale investors had to claim and “activate” their coins by running through a verification process. Most circulating supply calculations (like ours) only include activated tokens while excluding the ones left behind.

Unclaimed coins are not entirely uncommon. Over a quarter of the tokens sold in the ICO remained inactive just one year ago. Therefore, it’s possible an investor held off on claiming their XTZ fortune until this Jan.

A cross-reference with WhaleBot Alerts provided a slight reassurance on this hunch. On Jan. 29, 2020, an unknown whale transferred 8,825,140 XTZ between addresses. This move likely represents the investor activating these funds from the Tezos token sale claims address, adding them to the circulating supply and causing the supply jump. The newly claimed funds were quickly shipped to crypto exchange Kraken in a subsequent transaction.

A third transaction recorded a few hours later indicates the majority of these funds (eight million XTZ) were deposited into Kraken’s Tezos baker account. Since Kraken offers a flat reward rate of 6% on XTZ deposits, the owner can expect to collect an additional 480,000 XTZ ($676,800 at today’s price) by Mar. 2021. As for the remaining 825,140 XTZ (worth $1,278,967 at the time), there’s a chance the account owner sold them to realize a partial return on the initial investment.

The evidence suggesting whether this whale in hiding sold or staked these tokens is circumstantial at best. But the timing for a potential sale would be understandable, as XTZ price had just appreciated ~188% over the course of 2019. Considering the buy-in price for the token sale was $0.47, this entity stood to make a profit of almost $10.2 million.

The move also preceded a significant run-up in XTZ price. About three weeks after this new batch of coins activated, XTZ increase by another 130% before macro events dragged the entire market down to pre-spike levels.

Why it matters:

• Tezos has a reported annual issuance rate of around 5.5%, which accounts for the new coins introduced as baking rewards each year. But issuance rate fails to account for the other factors that can contribute to unforeseen inflation, such as vesting schedules and, in this case, unclaimed token sale coins. While inactive tokens must be trending towards zero, 56% of the Tezos Foundation and Digital Ledger Solutions (DLS) XTZ allocations (~85872030 or 12% of the reported supply) remain unvested and will unlock in monthly increments until Jun. 2022.
  

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