The vast majority of cryptocurrencies available on the market today use public blockchains to verify and record data. As a result, the data is “on the chain” available for anyone to see, at any time and from anywhere in the world.
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On-chain analysis refers to the method of using information from a blockchain ledger to determine market sentiment. More specifically, it involves looking at transaction data and crypto wallet balances – two things that are helpful when trying to decide whether or not to make an investment. After all, if a token is not traded by anyone and a vast majority of its circulating supply is controlled by a handful of large holders, known as whales, then it is probably not a good idea to invest in it .
On-chain tools you can use
Blockchain explorers like EtherScan for Ethereum and SnowTrace for Avalanche let you search any wallet address or smart contract. But they don’t aggregate data or provide tools to make sense of the wealth of data points that exist.
In response, countless platforms and resources have sprung up, each offering insightful charts and dashboards to better help users visualize blockchain data and track the movements of crypto and individual wallets.
Many of these on-chain analytics platforms are either free or at least offer many free features. Some of the popular ones include:
But analysis of the chain doesn’t tell you what to do. It is up to you to design a strategy based on available information. Here are some suggestions on how to make the most of the blockchain data dump.
Bitcoin movements
Bitcoin (BTC) is the world’s first viable cryptocurrency and the largest by market capitalization. As a result, the price movements can often cause a domino effect throughout the rest of the market; meaning that if the price of bitcoin goes up, so do other crypto-assets, and vice versa. So many investors typically keep a close eye on bitcoin’s chain activity.
Glassnode provides highly granular statistics for on-chain Bitcoin data, such as the movements of bitcoin whales, open interest in the futures trading market, mining difficulties and realized market capitalization. Some of the metrics are free for registered users, while others require a subscription.
Some metrics improve upon existing ones and represent a combination of different data points that can be very useful in identifying long-term market trends.
The concept of Coin Days Destroyed (CDD) was proposed in 2011 by BitcoinTalk forum user “ByteCoin” as an alternative to the Transaction Volume metric, which, according to them, does not take into account data manipulations that occur when one address moves around. the same coin several times. CDD gives more weight to how many days a coin has been held, so someone who received one BTC 10 days ago will hold the same weight as someone who moved 10 BTC one day ago. This can give you insights into the HODLing behavior of bitcoiners, as the following analysis using CDD suggests:
When we pull 1-year #Bitcoin data, we can clearly see the spending behavior represented by Coins Destroyed Days.
In a short period of time, any movement to the downside is just noise.
As a whole, most of the #Holders continue to #HODL and traders continue to lose their coins pic.twitter.com/q2TKvVvkbP
— EL CRYPTO TAVO (@elcryptotavo) April 6, 2022
Although Glassnode offers a few cards for Ethereum, it is largely dedicated to Bitcoin. For smart contract activities, such as on-chain analysis of decentralized finance (DeFi) or non-fungible tokens (NFT), you will need to turn to other sources.
Smart contracts and the flow of smart money
In traditional finance, “smart money” refers to any capital controlled by professional investors, institutions and funds. The term has also entered the DeFi lexicon, where it refers to institutions such as crypto venture capital funds or whales (those who own proportionally large amounts of crypto).
Nansen is a popular source for tracking where smart money flows in and out. The platform has marked more than 100 million individual wallets so that they do not appear as 0x32456, but as “3 Arrow Capital” and so on. It offers free features, including “Hot DeFi Contracts,” which allow you to track what projects those in the know are currently playing with, such as a liquidity pool on Avalanche as the photo below shows.
Data on specific projects
If you’re looking for data related to a specific DeFi or NFT project, you’ll likely find it on Dune Analytics, a free contributor-driven platform that wants to be the GitHub of Web 3.
Just type the NFT project or DeFi protocol you want to know more about in the search bar. You can also try the “Explore” tab to see the most popular dashboards, such as Aave v3 activity on Optimism (a layer 2 scale system):
Dune has some dashboards similar to Nansen’s smart money tracking. For example, you can see what the holders of the most expensive NFT collection, Bored Apes Yacht Club (BAYC), are buying and selling. But you’ll have to search for dashboards like this individually.
Read more: How to use Dune Analytics
NFT insights
The recent white-hot trend of NFTs has also led to a variety of on-chain analytics tools specifically focused on the NFT market.
CryptoSlam offers NFT sales volume, while Icy.Tools can view your real-time sales data.
Because the price of items in an NFT collection is often determined by their rarities, traders use tools like Rarity.Tools and LuckyTrader to understand where an individual item’s rarity sits in a collection based on un- chain data.
BlockProbe is an example of a platform that has a Deal Spotter feature, which tells users when a particular NFT is selling at a bargain based on a collection of data.
For big-picture analysis, one particularly popular resource is Dune’s dashboard on OpenSea activity. NFT traders use this dashboard to gauge sentiment, with daily volumes in excess of $100 million widely considered indicative of a bullish NFT market.
For me, the simplest indicator that an NFT market bull resumes is when we retrace $100m daily volume and hold.
Until then, I will not significantly increase my broad NFT market exposure, but I will look for strong projects to buy.
There will be a lot of ops this month for $ pic.twitter.com/EEUUWbxASu
— Kix.eth (@SpeculatorArt) March 8, 2022
Disclaimer for Uncirculars, with a Touch of Personality:
While we love diving into the exciting world of crypto here at Uncirculars, remember that this post, and all our content, is purely for your information and exploration. Think of it as your crypto compass, pointing you in the right direction to do your own research and make informed decisions.
No legal, tax, investment, or financial advice should be inferred from these pixels. We’re not fortune tellers or stockbrokers, just passionate crypto enthusiasts sharing our knowledge.
And just like that rollercoaster ride in your favorite DeFi protocol, past performance isn’t a guarantee of future thrills. The value of crypto assets can be as unpredictable as a moon landing, so buckle up and do your due diligence before taking the plunge.
Ultimately, any crypto adventure you embark on is yours alone. We’re just happy to be your crypto companion, cheering you on from the sidelines (and maybe sharing some snacks along the way). So research, explore, and remember, with a little knowledge and a lot of curiosity, you can navigate the crypto cosmos like a pro!
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