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Wallet concentration measures the distribution of tokens among holders. High concentration suggests that a few wallets control significant supply, increasing potential market manipulation risks. Conversely, low concentration indicates decentralized ownership, reducing volatility and improving ecosystem health. Analysts study wallet concentration to evaluate price stability, investor influence, and protocol adoption. Changes in major holder activity can signal upcoming moves, affecting market sentiment. For researchers, monitoring these patterns aids in risk assessment, early warning for potential sell-offs, and strategic positioning. Wallet concentration metrics are especially valuable when combined with on-chain volume and transaction frequency for a holistic understanding of token distribution and market dynamics.
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