When investing in cryptocurrency, there are many things to consider before making an investment decision, and on chain analysis crypto is one of them.
Knowing and understanding “onchain analysis crypto” and “how to do onchain analysis data” etc, you can make a better investment decision.
This is a comprehensive guide that details on-chain analysis crypto, tools, and how you can do onchain analysis like a pro.
Let’s delve into it…
What Is On Chain Analysis Crypto?
Onchain crypto analysis and onchain data move together, so let’s take a look at what on-chain data is.
On-chain data are those transactions that have been verified and recorded on the blockchain, users can use this data to predict the price movement of the market.
Everyone can access all transactions done, and recorded on the blockchain through blockchain explorers like, BscScan[ Binance smart chain scan], Etherscan[ Ethereum blockchain scan], etc.
With the public blockchain. Anyone can access or extract data from the blockchain freely, analyze it, and use it to predict the price or the direction of the market to get insight on market trends, and how other investors think, and behave. This is what we refer to as on-chain analysis.
If you can exhibit the habit of watching and tracking the crypto market consistently, you can make potential gains in the long run with this strategy.
Thus, fundament and technical analysis might give you valuable insight into market trends, Excrating and analyzing the market through onchain sources will give you a better view of the blockchain.
Meanwhile, you can use the three methods to do your analysis and get the cryptocurrency’s potential.
In simple terms, on-chain analysis can also be referred to as observing or knowing the way money moves around on the blockchain.
This strategy reveals why users are buying or selling a particular asset. With this, individuals can catch investment opportunities.
How To Do On-Chain Analysis Using On-chain Data
Here is a step-by-step guide on how to do on-chain analysis using on-chain data. There are numerous statistics that you can use to do on-chain analysis, you can use these statistics to know if the token or coin is secure and safe. These statistics include the following;
Active Wallet Address
Using this first method “Active Wallet Address”, you can watch and gain insight/understanding of the user’s behavior and growth.
An increase in active wallet addresses over time indicates the project is growing and gaining traction.
But a decrease in active wallet addresses signifies the project is dying or lacking user interest. You can analyze this by tracking the weekly or monthly number of active wallet addresses that send or receive a particular token/coin.
it is also crucial to compare the amount of wallet address that is active on the network to other data such as the volume of transactions on the network.
To do this, you can use blockchain explorers like Bscscan, Etherscan, Tronscan, and a lot more.
Also Check: DeFi Vs TradFi – Things You Must Know About
Circulation Of Token/Coin
Monitoring the circulation of a particular coin or token on the blockchain network may provide valid data regarding dispersion.
The allocation of a coin/token total supply is calculated by the token circulation division or supply distribution.
When a token or coin is fairly distributed, it indicates that the token or rather coin has a decentralized network, but when a cryptocurrency is distributed to a few or fewer users, it indicates that the network is been controlled.
In this case, you can track and study the number of wallets holding a certain percentage of the coin or token total supply to know how it is circulated or supplied.
Volume Of Transaction
The total amount of transactions on a blockchain network over a certain time period is referred to as transaction volume.
It can be used to assess network activity and demand for the underlying asset.
Transaction volume analysis can aid in the identification of trends and patterns in user behavior, such as increases in transaction volume during moments of high market volatility.
To measure transaction volume, track the daily or weekly number of transactions on the network, as well as the average transaction size and charge. Similarly, blockchain explorers provide this information.
Total Value Locked
Total value locked (TVL) is a metric that calculates the total value of assets that are locked in smart contracts or decentralized apps (dApps) on a blockchain network.
It can be used to analyze the extent of dApp acceptance and usage, as well as the demand for the underlying asset.
TVL can be examined by tracking the daily or weekly value of assets locked in various dApps on the network, as well as the number of users and transactions.
Thus, it’s also critical to compare TVL across different dApps and networks in order to spot trends and patterns in user behavior.
A tool like DefiLlama can be used to determine a chain’s TVL and how it compares to the rest of the market.
Capitalization Of The Market As A Whole
The market value of a cryptocurrency is its total asset value. It is typically computed by multiplying the price of an asset by its circulating supply.
Large-cap cryptocurrencies are commonly seen as secure crypto investments, whilst mid-cap cryptocurrencies are volatile with growth potential. Small-cap cryptocurrencies, on the other hand, are highly volatile and considered unsafe to invest in.
Tools For On-Chain Analysis
To do a complete on-chain analysis, there are numerous tools to use, and this includes the following;
Dune Analytics
Dune is a popular on-chain analytics tool you may want to try out, you can use it to derive a lot of information on blockchain data. Dune is mostly used for querying the Ethereum blockchain data through simple SQL queries.
The most amazing part of why people often use the platform is that it queries, extracts, and also shows a high transaction volume on blockchain data.
Why use Dune Analytics?
- All information on the Dune platform is easily understandable by its users, and the chart and graphs look attractive and pleasing to the eyes.
- Users have access to several blockchain data/statistics on the platform.
- The platform gathers a lot of on-chain data/information and converts it into SQL databases that can be queried.
Glassnode
Glassnode is a notable and well-known analytic tool by top crypto/blockchain gurus who analyze on-chain data on a daily basis.
The platform offers a variety of crypto price data/information through on-chain indicators. Glassnode was created in the year 2018. it intends to simplify customers analysis, and also improve the decision they make by providing market insight along with applicable on-chain data.
However, Glassnode is most well-known for its detailed analysis of market trends/indicator for different cryptocurrencies. With Glassnode tools, you can stay ahead in the crypto trading trends.
Its feature includes a variety of graphs/diagrams offering deep information on wallet activities, balance, network expansion, token/coin supply, the total number of holders, and a lot more.
Why Use Glassnode?
- There are numerous on-chain price indicators for over 800 assets. Glassnode has more than 200 metrics/statistics.
- Users can customize/edit their dashboard to their choice by adding more metrics or indicators. Different metrics on assets can be compared.
- Individuals can connect their Trading View account to Glassnode. There is a lot of data/information on popular assets.
Nansen
Nansen provides on-chain statistics through the combination of blockchain data using 250M+ assigned wallets. However, Nansen is most used by top/professional crypto traders looking for detailed information or data.
The most amazing fact about Nansen is that beginners in crypto trading/investment can also use it to master their craft and learn more about cryptocurrencies.
Why Use Nansen?
- Nansen has a simple dashboard with a lot of information. Movement in price can be predicted by analyzing trends.
- Users can customize an intelligent alert on the platform. Personalized report.
- Individuals can get on-chain statistics on popular projects e.g. Ethereum, Binance smart-chain, etc.
IntoTheBlock
Intotheblock is another useful and popular on-chain analysis tool you might want to use. A lot of crypto degens/traders utilize Intotheblock to make the perfect decisions on a potential trade.
This platform uses AI known as artificial intelligence to ease research for users. Intotheblock is backed by some leading funds in the crypto industry such as GumiCryptos, Borderless Capital, New Form, and a lot more.
Why Use Intotheblock?
- Users can analyze metrics that utilize on-chain statistics to reveal fundamental analysis for more than 900 crypto assets.
- Intotheblock uses artificial intelligence to analyze the prices of the top crypto market.
- Individuals can access Defi analytics tools to get general information/data in the Defi space.
- Users can compare spot and derivatives trading data as well as market sentiment for any crypto asset on the platform.
- Intotheblock allows individuals to discover universal and collection analytics and get an overview of the NFT Market.
Messari
Messari streamlines the asset listing vetting process and enables teams to properly monitor them, assisting research, analyst, trading, investing, and data science teams in making more informed opinions.
Through diligence reports, you can monitor your existing networks and discover new prospects.
Messari Protocol Services simplifies protocol and community stakeholder communication, KPI tracking, and user interaction.
Why Use Messari?
- Messari offers access to various watchlists to keep track of the assets that are important to Individuals.
- Anyone can get detailed reports on project details, legal concerns, technology, and more.
- With Messari, Users can Keep an eye out for governance initiatives and learn more about the DAO landscape.
- Messari allows access to export historical assets, protocol, and governance data for over 1000 assets.
- Individuals can look through handpicked news from prominent media and project blogs.
- Messari Pro gives users a competitive advantage by uncovering hidden market opportunities and learning about new projects.