Concentration

Overview

The Concentration indicator shows the distribution of a crypto-asset’s circulating supply. Assets with high supply concentration will have whales and/or investors controlling most of the volume, while assets with low supply concentration have most of the circulating supply held by retail users. To clarify, IntoTheBlock classifies these three groups the following way:

Whales - Addresses holding over 1% of a crypto-asset’s circulating supply.

Investors - Addresses holding between 0.1% and 1% of circulating supply.

Retail - Addresses with less than 0.1% of circulating supply.

💡 How can I use it?

Concentration is a helpful metric to estimate how decentralized/concentrated a crypto-asset is. In general, it is preferable for a crypto-asset to be held mostly by retail addresses as this points to a decentralized network with widespread adoption. Additionally, there are risks involved if a crypto-asset is highly concentrated among whales and investors addresses:

1) High supply concentration points to low decentralization. This is the case as if one person held 99% of the supply it would not be considered a decentralized ledger after all. If these addresses hold a large enough portion they could act maliciously to the expense of small holders.

2) A large amount of whales (especially high activity whales) points to few players moving the market. Therefore, this suggests that whales could potentially sell and crash the crypto-asset’s price.

Disclaimer. The whales indicator and other ownership indicators do not differentiate regular addresses from exchanges and smart contract addresses. Hence, the indicator provides an approximation of the concentration of ownership but not a fully-detailed one. IntoTheBlock is working on better classifying whales and smart contract addresses.

Last updated