The Herfindahl-Hirschman Index (HHI) is a simple but powerful metric used to measure how concentrated the ownership of a meme coinโs supply is.
It is calculated by squaring the percentage ownership of each wallet and summing all those values, producing a score that ranges from near 0 (perfectly distributed across thousands of holders) to 10,000 (one wallet owns everything).
Lower score implies fewer whales and less whale capitulation risk.
Higher score implies more whales or team and higher whale capitulation risk.
In an ideal world, you want an HHI of ~0 because this means there are many holders but none of them are whales.
A low HHI is very difficult to achieve because it means whales have to sell and be replaced by tons of small fish, which is difficult and unlikely.
However, if a low HHI is achieved, a coin becomes bullet proof, as there arenโt individuals that can crash the price.
In crypto, a coin with momentum typically goes up forever, until the whales begin to take profit.
It is why some coins like
$punch go to $100 m , while some coins like
$unc only go to $20 m.
It has nothing to do with the โnarrativeโ, it only has to do with when the whales decide itโs time to sell.
Sometimes whales are aligned, like
$GIGA in 2024. Sometimes they are not, like 99.99% of new pairs.
Crypto Twitter always talks about โgoodโ or โbadโ whalesโฆ
Sure, you can sell โrespectfullyโ or โfull stack hitlerโ
But one thing is for certain, whales will always sell.
In the case of low HHI, there are no whales deciding when itโs time to sell.
If whales never slow momentum, a coin never slows.
That is why distribution is likely the single most important factor in crypto.
However, distribution is the single most difficult thing to achieve, as it requires a ton of whale sell pressure a long time for thousands of people to slowly buy it up, with no new whales forming.
$GIGA currently has the lowest HHI at 18. It is why it is able to maintain a relatively high market cap, despite 0 volume and being faded by the majority of CT.
Donโt be fooled though, just because a coin is down and holding a relatively high market cap, does not mean it became distributed.
$MOODENG for example is down a lot and is holding a high market cap, but has an HHI of 458.
It should also be noted that none of this matters until the bull market though because no coin will catch momentum until then.