The Ethereum Herfindahl Index is used to measure the share of network addresses in the current supply, i.e., the concentration of holdings. A high index indicates that a few large holders are dominating the market, while a low index indicates a more even distribution of holdings.

When the token is first issued, early holders often concentrate a large portion of the supply, resulting in a higher Herfindahl Index. As these early holders sell off, the index begins to decline, reflecting the gradual dispersion of token distribution.

(Figure 1)

Figure 1 shows the ETH Herfindahl Index; it can be seen that this index has been in a continuous decline from February 2016 to March 2023, indicating that during this period, the concentration of ETH holdings has become more dispersed. After March 2023, the index began to flatten out, suggesting that the degree of dispersion has bottomed out. From March 2023 to December 2024, this level has been maintained.

However, after December 2024, the concentration of holdings suddenly began to rise, which has never happened since 2016. Could this be due to the increase in spot ETF holdings, leading to a rise in the Herfindahl Index?

(Figure 2)

Figure 2 shows the ETH spot ETF holding data. It can be seen that the fastest growth of spot ETFs occurred from November 2024 to December 2024, increasing from 2.73 million ETH to 3.58 million ETH during this period. After December, the growth rate significantly slowed down and remained stable. The ETH Herfindahl Index began to rise after December, so it is not caused by changes in spot ETF holdings.

This indicates that certain large funds are indeed accumulating holdings, causing the concentration of ETH to slowly increase.

For example, in the tweet I mentioned on March 15 (see citation), the large addresses that built positions at $3,500 have been continuously averaging down as ETH dropped to $1,900, increasing from 1.66 million ETH to 1.94 million ETH; additionally, when the price reached the average cost of $1,850 for a group of large holders two years ago, they began to buy back the portions they sold at higher prices to average down their costs, increasing from 1.6 million ETH to 2.12 million ETH.

Whether these whales are passively buying to save themselves or actively accumulating at low prices, it will gradually increase the concentration of holdings. So, is ETH really 'changing hands'?

But this is a very slow process, as during this period, other whales may continue to sell their holdings, thereby reducing concentration. An increase in concentration has both advantages and disadvantages; the advantage is that when it rises to a certain degree, prices are easier to control (easier to pump); the disadvantage is that during the process of large capital collecting holdings, the market may become quite painful and torturous.

It took 7 years for the initial dispersion of holdings (distribution), so how long will it take for the current concentration of holdings (accumulation)...

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My sharing is for learning and communication purposes only and should not be considered investment advice.