On-chain Data for Successful NFT Investment: Analysis of NFT Holder Concentration

On-chain Data for Successful NFT Investment: Analysis of NFT Holder Concentration


✅The NFT holder concentration is a crucial metric determining integrity and investment stability.

The holder concentration of the top 5 NFT collections is generally low, dispersed among diverse holders.

Using HHI, one can calculate and track the holder concentration in the NFT market over time.

The NFT market is susceptible to rapid HHI fluctuations, necessitating ongoing monitoring.

To hold NFTs securely, considering the holder concentration is vital, with HHI aiding in evaluation.




Ethereum stands out at the most popular platform among blockchains supporting smart contracts. In particular, Ethereum-based NFT contracts play a crucial role in redefining digital asset ownership.


The NFT holder concentration reveals whether a small number of holders possess an excessive amount of NFTs. It serves as a crucial investment metric associated with the integrity of the NFT community and the stability of NFT investments. If a small number of holders possess a majority of NFTs, it can expose the market to price distortion and volatility. Conversely, if a diverse group of holders owns NFTs evenly, it can help maintain market price stability. Therefore, understanding the extent to which each NFT is distributed among holders is essential for the healthy growth of the NFT market.



Introduction to Top 5 NFT Collections

Here are the top 5 Ethereum-based ERC-721 NFT collections in terms of the trading volume in USD over the past year.


Ethereum Mainnet ERC-721 Transfer Events emitted (Excluding L2) since April 2023, excluding wash tradings.


Bored Ape Yacht Club

A unique collection of digital ape artwork, each featuring unique artwork created by individual artists.


Mutant Ape Yacht Club

A derivative project of the Bored Ape Yacht Club, also featuring a unique collection of digital ape artwork.



An NFT collection based on Japanese miniature art, offering a variety of artwork.


Pudgy Penguins

A collection featuring unique penguin characters as motifs.



A diverse collection of unique PFPs (Profile Pictures) with a distinctive style.



Concentration Calculation Method: Herfindahl-Hirschman Index (HHI)

The Herfindahl-Hirschman Index (HHI) is one of the key metrics in econometrics used to measure the level of competition in a market. This index evaluates how concentrated a market is based on the market share of each entity within a specific market, such as companies or individuals.


HHI is calculated by summing the squares of the market shares held by each entity in the market. For example, if four companies have market shares of 30%, 30%, 20%, and 20% respectively, the HHI would be 0.26 (0.09 + 0.09 + 0.04 + 0.04 = 0.26).



As the number of entities in the market increases and their market shares are distributed evenly, the HHI approaches 0. Conversely, if one entity dominates the market, the HHI approaches 1. According to the Horizontal Merger Guidelines of the United States Department of Justice, market concentration is evaluated based on the following HHI values:


💠HHI < 0.15: Unconcentrated Markets

💠0.15 ≤ HHI ≤ 0.25: Moderately Concentrated Markets

💠0.25 < HHI: Highly Concentrated Markets


Now, let’s use this as a benchmark to evaluate the concentration of holders in the top 5 NFT collections.



Analysis of HHI for Top 5 NFT Collections

Let’s now analyze the concentration of holders for each NFT collection using the HHI. First, Let me introduce you to the basic method of calculating holder concentration through the following two cases.



Method for Calculating Holder Concentration

Case 1) High Holder Concentration

The table above represents a case with high holder concentration. The distribution of NFT holdings among holders is uneven.

HHI = 0.49 + 0.04 + 0.01 = 0.54

Case 2) Low Holder Concentration

The table above represents a case with low holder concentration. The NFT holdings among holders are relatively balanced.

HHI = 0.09 + 0.09 + 0.04 + 0.04 = 0.26



Current HHI Values

As of April 2024, the HHI for the top NFT collections is as follows. All HHIs are below 0.15, indicating a relatively low holder concentration. Therefore, it can be evaluated that there are many NFT holders, and the tokens are evenly distributed without being biased towards specific holders.



HHI Trends (Comparison with Benchmarks)

As with all other markets, the HHI can fluctuate continuously over time. This is because NFT trading, minting, burning, airdrops, and other factors can lead to changes in the holders of each token and the number of NFTs held by each holder. Now let’s examine the HHI trends of each NFT collection from early 2023 to April 2024.


Most NFT collections have had an HHI much lower than 0.15 from January 2023 to the present, suggesting that there hasn’t been a critical impact in terms of market concentration. However, in the case of DeGods, its HHI was above 0.25 until May 2023, indicating a highly concentrated market, and it remained above 0.15 until July 2023, indicating a moderately concentrated market. Therefore, in 2023, DeGods used to have a high level of concentration with only a few holders owning NFTs, but over time, as the community grew, the concentration naturally decreased to within normal ranges.



HHI Trends (Microscopic View)

This time, let’s examine the HHI trend of each NFT collection more closely without comparing it to benchmarks.


The HHI trend shows a unique pattern, often exhibiting sharp increases or decreases at specific points in time. This is because, unlike traditional markets, NFT collections are prone to significant minting and burning events or panic selling and buying, leading to rapid fluctuations in the NFT economy. Therefore, even if the HHI is very low at the current moment, it could sharply rise to become a concentrated market at any time. Thus, continuously monitoring the HHI indicator is crucial.




When purchasing NFTs, many people only consider factors such as the NFT’s story, artistic value, community size, and floor price. However, NFTs are assets with very low liquidity, similar to real estate and artworks, making it difficult to establish a clear exit plan and potentially resulting in significant losses during the selling process. While checking trading volume trends can be helpful, it can also be challenging to make judgments excluding falser information such as wash trading, and the market can be subject to sudden fluctuations due to specific whale holders, leading to significant economic impacts.


Therefore, when aiming to hold NFTs for the long term, it’s crucial to evaluate the concentration of holders, and the HHI serves as a significant measure for such evaluations. I hope that by carefully examining the HHI through on-chain data, it will aid in making data-driven decisions when purchasing NFTs.

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