Let’s delve into the fascinating field of crypto known as on-chain analysis. This powerful tool enables users to delve into the structure of the blockchain and extract valuable information about the cryptocurrency market. What is on-chain analysis? It is the process of examining data available on the blockchain, encompassing transactions on the blockchain, wallets, miner activity, and many other aspects directly related to the functioning of cryptocurrencies. Through this, we gain a better understanding of the captivating world of digital assets and can make more informed investment decisions.
On-chain analysis comprises several key aspects, here they are:
- Transactions on the blockchain: Analyzing these transactions allows us to track the flow of funds between different wallet addresses, identifying large transactions that may indicate significant market changes.
- Miner activity: It can provide valuable information, especially regarding the network’s security and the strength of cryptocurrencies.
- Wallet resources: Enables the observation of current and historical wallet holdings of various tokens, a crucial aspect of on-chain analysis – who owns how much of which tokens.
- Large investors’ wallets: Analyzing the strategies of major investors can aid in forecasting market trends.
- Exchange flows: Concerning the movement of funds between individual user wallets and exchanges, allowing an assessment of whether assets deposited in exchange wallets are likely to be sold.
- Whale alerts: Movements of individuals holding a large amount of a particular cryptocurrency can influence market sentiments.
Indicators useful for assessing activity on the blockchain:
- Number of active addresses in the network.
- Daily transactions.
- Total transaction volume.
- Total Value Locked (TVL).
- Number of unique token holders.
- Net Unrealized Profit or Loss (NUPL).
- Funding Rates and Open Interest.
- Bitcoin Days Destroyed.
- Network Value to Transactions (NVT) Ratio.
- Exchange Flows.
- SOPR (Spent Output Profit Ratio).
Why does on-chain analysis matter? It allows identifying market trends, which is crucial for effective investment strategies and detecting manipulation and dishonest practices on the blockchain. It also helps to better understand how users engage with a particular cryptocurrency.
Are there ready-made tools in the market for conducting effective on-chain analysis? Absolutely! This category includes tools such as Looknode, Etherscan, Glassnode, Icy Tools, and Token Terminal.
On-chain analysis is an incredibly powerful tool that enables a better understanding of the functioning of the cryptocurrency market. Remember that utilizing this knowledge requires analytical skills and caution.
