What is the Concentration Index?
Investors can use the Concentration Index as a risk management tool that helps gauge the level of decentralized ownership of a particular token.
If the Concentration Index is 100 – almost all tokens are held by 1 wallet address. If the Concentration Index is 0 – all tokens are perfectly distributed amongst all holders. The higher the Concentration Ratio, the easier it is for the token price to be manipulated by whales. The lower the Concentration Ratio, the harder it is for the token price to be manipulated by whales.
The red line represents absolute wealth equity – holding a perfect balance between the number of token holders and the amount of tokens held by each one. The blue line represents a sample distribution for a realistic relationship between the number of token holders and how much they own.
How to use the Concentration Index?
The Concentration Index is an effective metric that can help you observe the long and short views, or hoarding behavior of price influencers. According to our research, when strong token holders continue to be bullish on a token, the Concentration Index will continue to rise.
When observed that the Concentration Index of a token sharply rises, it is likely that tokens are flowing from retail investors to whales, as they begin to accumulate their position.
On the flip side, as the Concentration Index sharply decreases, it means that whales are leaving their positions – this can indicate a pump and dump or a rug pull.
By analyzing the Concentration Index and the movement of it, you can acquire a better understanding of market dynamics and make better investing decisions. You can find more details on the Concentration Index and its practical use in this case study.
What are Top Holders and Top Movers?
A collection of top wallet addresses currently holding the top 1% of tokens.
How to analyze Top Holders
Top Holders, commonly referred to as “Whales,” represent a group of highly influential holders of a particular token. Generally speaking, these entities fall into one of the following categories:
- Project team
- Early investors
These market participants represent a collection of the top 1% of wallet addresses that produced the most token inflows and outflows in the past 30 days.
- Top Movers = Top Inflows + Top Outflows
- Top Inflows = Top 0.5% of Token Inflow wallet addresses in the past 30 days
- Top Outflows = Top 0.5% of Token outflow wallet addresses in the past 30 days
How to analyze Top Movers?
Compared to Top Holders, Top Movers provides a dynamic perspective of the market due to the constantly changing collection of wallet addresses that fall under this definition.
In the Top Movers section of the AlphaFlow, you’ll find the top 10 addresses with the most inflows and outflows in the past 30 days, helping you understand the general momentum of token holders.
In addition, according to different Entity transaction attributes, the observed Top Mover behavior can be roughly divided into several reasons according to different Entity and transaction attributes:
According to the behavior exhibited by Top Movers, the explanation behind the large inflows and outflows related to their wallet address belong to one of the following reasons:
- Top Holders are exiting/accumulating their position
- Swing trading
- Pump and dumps