This article takes a look at on-chain analysis and how it can improve your crypto trading and investing.
On-chain analysis (also called blockchain analysis) involves analyzing the factors of cryptocurrencies with the aim of improving investment and trading decisions.
In addition, on-chain data is the information of every transaction that has taken place on a network. In the case of public blockchains, such as Bitcoin and Ethereum, anyone can access these transactions.
When properly utilized, on-chain metrics make blockchain transaction data become more applicable to crypto market information. For instance, this means combining indicators with technical and fundamental analysis to have better information. It could also be a case of monitoring and following whale movements.
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Forms of On-chain Data
Notably, on-chain data could be in three forms, which are as follows:
- Raw On-chain Data: This typically involves some of the simplest indicators that can be useful in determining the level of development on a network. These include the number of transactions on a chain, the volume of transactions on a chain, and the number of active addresses. As well as, the number of wallets with a non-zero balance and the total wallets with a certain amount of tokens held. Besides, data of this form is accessible with a simple block explorer. This data is quite useful and also serves as a great starting point.
- Aggregated Data: This is aggregated on-chain metrics. Such data also gives more insight into the true state of things on a network. There are quite a lot of platforms that provide insightful dashboards and charts. A major advantage of this type is that it helps users to picture the blockchain data. Notably, some of the platforms that provide these services are Nansen, Dune, and Messari.
- Entity Data: This type involves using data to link a set of wallets to institutions and individuals. Therefore, this type makes it possible for users to know if certain institutions or individuals are holding, selling, or buying. In other words, it can be used to track the activities of crypto whales or major players in the cryptosphere.
How to Obtain On-chain Data
The best approach to obtaining on-chain cryptocurrency data is by searching yourself, although this will require running a node.
Another way of obtaining on-chain data is from analytical websites. There are several crypto data platforms, and many of them leverage machine learning to get better insights. Some of these platforms are as follows:
- Glassnode offers simple on-chain metrics at zero cost. As well as, advanced metrics and high-frequency time-series data at a given fee.
- CoinMetrics offers free data for about 37 crypto-assets. This includes on-chain metrics and correlations.
- IntoTheBlock is also a platform that provides a wide range of analytical tools. It covers sentiment analysis, order book data, and on-chain analysis for several crypto-assets.