Some investors have a lot of money in cryptocurrencies. They're sometimes referred to as "whales" to reflect just how large their positions are. And we're not talking about $100,000 or so in a given cryptocurrency -- whales own millions and even billions of dollars worth of digital tokens.
As you might expect, the biggest cryptocurrencies based on market cap -- Bitcoin and Ethereum (ETH -2.24%) -- tend to especially attract whales. But they don't always limit their investments to just one cryptocurrency.
Ethereum whales appear to really like Shiba Inu (SHIB -2.48%) these days. Right now, they own more than $1.3 billion of the meme coin, according to WhaleStats, a website that tracks the top 1,000 largest Ether wallets.
Why are Ethereum whales betting such a large amount on Shiba Inu? Here are arguably the best explanations.
Counting on catalysts
Obviously, Ethereum whales expect Shiba Inu's price to rise. Otherwise, they'd be crazy to invest so much in the digital coin. But with Shiba Inu falling more than 25% in recent weeks, the Ethereum whales have to be counting on some catalysts to spark a rebound.
One reason why Shiba Inu and other cryptocurrencies have fallen is that investors are worried about the possibility of a full-blown Russian invasion of Ukraine. Some Ethereum whales could expect that the Russia-Ukraine tensions will quickly blow over.
Another potential catalyst that Ethereum whales could be betting on is the anticipated launch of the Shibarium layer-2 solution. This project will drastically lower the transaction fees for Shiba Inu.
In addition, Shiba Inu's metaverse opportunity has generated plenty of buzz. Although the cryptocurrency won't capitalize on this opportunity immediately, it's possible that the excitement as progress is made in the transition could boost the meme-coin's price.
An oldie but a goodie
There's also a possible reason for Ethereum whales' interest in Shiba Inu that's an oldie but a goodie -- diversification. It isn't just super-wealthy investors who understand the importance of diversifying their holdings.
Shiba Inu is one of several cryptocurrencies in which Ethereum whales have large positions, according to WhaleStat. These whales have nearly $1.4 billion invested in FTX (FTT), the native token of the FTX crypto-trading platform.
USD Coin (USDC) is another favorite of Ethereum whales. They have invested nearly $920 million in the stablecoin, based on WhaleStat's data.
Of course, buying other cryptocurrencies only provides limited diversification. It's likely that Ethereum whales also have plenty of their money parked in other types of assets, as well.
Swimming in choppy waters
There's a reason why these Ethereum whales aren't known as Shiba Inu whales. Despite placing a big bet on the meme coin, they still have a lot more of their money invested in Ether tokens.
Ethereum whales no doubt recognize that Ether has similar potential catalysts as Shiba Inu does. A resolution of the Russia-Ukraine crisis would likely benefit all cryptocurrencies. While Shiba Inu fans eagerly await the launch of Shibarium, Ethereum has a major upgrade on the way that will reduce its transaction fees, as well. And it could win with the rise of the metaverse, too, with several of the leading gaming coins built on its blockchain.
But investing in cryptocurrency is fraught with risk. That's especially the case with digital tokens that don't have as much real-world utility as others do. Regardless of the merits of Shiba Inu, it doesn't compare with Ethereum in terms of real-world utility.
Ethereum whales are betting in a big way on Shiba Inu. Those bets just might pay off nicely. However, the whales are without question swimming in choppy waters for now.