On-chain analysis is a powerful tool for traders and investors looking to gain an edge in crypto markets. It involves examining blockchain transaction activity to understand how investors react to market forces/events and determine emerging trends/investor sentiment. With on-chain analysis, investors have access to unparalleled levels of data that can make informed decisions about their investments.
The coin days destroyed (CDD) measure was the first on-chain metric introduced. ByteCoin, a member of Bitcoin Talk, devised it in 2011 as a method for determining the state of the market and the level of involvement in it by examining the average age of bitcoins that were traded on any day.
One of the most talented on-chain analysts, Willy Woo, created the network value-to-transactions ratio (NVT) in 2017. That was the year that saw the commencement of several rapid improvements in on-chain research. Following the quick changes in 2018, there has been a significant rise in the utilization of on-chain analysis.
1. Gather data from public networks such as Bitcoin, Ethereum, Ripple, and Litecoin. 2. Examine the blockchain transaction activity to identify patterns and correlations between investors’ actions and market forces/events.
3. Analyze the collected data to understand how investors react to different market occurrences and spot potential investment opportunities. 4. Use whale-watching tactics 5. Use an on-chain analytics platform to gain a deeper understanding of trends emerging from the collected on-chain data so that traders can make better decisions based on it.
1. Gain an in-depth understanding of the cryptocurrency markets. 2. Uncover emerging trends and investor sentiment. 3. Make informed decisions about investments based on data-driven insights. 4. Identify potential arbitrage opportunities for quick profits. 5. Monitor transactions to detect suspicious activity or potential scams early on. 6. Assess the current liquidity of certain cryptocurrencie
1. It requires a significant amount of data to make informed decisions, which can be difficult to get for certain cryptocurrencies that don’t have enough trading activity or liquidity. 2. On-chain analysis is only as good as the data that it’s based on. If the data is inaccurate or outdated, any decisions made based on it will also be flawed. 3. On-chain analysis doesn’t consider fundamental factors such as news events and market sentiment, which can significantly impact the price of crypto.
1. Network Growth Rate 2. Transaction Volume 3. Exchange Flow 4. Trading Volume 5. Hash rate
1. Glassnode 2. Nansen 3. CryptoQuant 4. Santiment 5. Dune Analytic