How to Use On-chain Metrics to Evaluate Crypto Market Trends

Bitcoin and Ethereum keep all transactions openly documented. Over the years, numerous metrics and analytical tools have been created to improve our understanding of market trends, network activity and how investors behave. On-chain metrics act as the beacon for investors, helping them understand the market sentiment. Here we will explore the use of onchain statistics to evaluate crypto market trends:

Onchain data refers to all the details of information that go directly into the blockchain and the overall design of the structure. This includes features such as transaction details, records stored in smart contracts, historical data related to blockchain assets, and many more.

Tracking patterns in the sum of transactions can reveal the network’s health, provide clues about its expansion, or even detect problems if there are unexpected drops in activity.

The number of wallets that have been involved in the blockchain over a certain period of time shows how engaged users are and the size of the network’s community. Monitoring engaged wallets provides important insights into how active users are, the health of the network, and the possibility of a growing community.

In theoretical terms, this term generalizes the ownership of all coins by considering them as assets stored in a decentralized financial (DeFi) environment. It shows the absolute and relative levels of DeFi projects, which is critical to evaluate the health state of the DeFi ecosystem.

To fully benefit from on-chain analytics evaluation, it is crucial to ensure that you are using the latest information.

The listed indicators provide a summary for investors and speculators about the network, covering its security, usage and monetary policy operations. Are the long-term fundamentals sound? Expanding the network? These blockchain tools will help us understand.

1. Active addresses

Active addresses indicate the amount of active addresses present on the network. Although they do not directly reveal the exact number of users across a network, they provide insight into the use of addresses by exchanges, miners and users. Over time, there has been a historical relationship between the number of active addresses and the price of cryptocurrencies.

2. Inventory distribution

Coin allocation illustrates the proportion of coins stored in locations sorted by volume. For example, locations with more than ten thousand bitcoins have recently seen a decrease, while locations with less than ten bitcoins have seen an increase.

3. Hash rate

Hash rate indicates the amount of computing power that miners produce to protect the network. In general, the higher the hash rate, the more secure the network.

4. Daily issue

Every day the total number of new coins given to miners and strikers is released. From this one can conclude that economic policy to manage the money supply of this cryptocurrency is effective, because with two years more often it reduces the amount of money by two and with four years limits the total amount of money below the total limit of 21 million. .

5. Mining revenue

Miner earnings come from the total value of newly mined bitcoins and the fees associated with transactions. Strong earnings indicate a robust network where miners are motivated to protect the network’s future.

The on-chain statistics listed above indicate the overall health of the network over time, while the subsequent statistics better reflect the market’s short- to medium-term behavior. These statistics can reveal the amount of cryptocurrency stored by miners, exchanges and individuals, as well as their financial status, indicating the prevailing market mood.

1. Realized capital letters

Capitalization realization combines the latest selling prices of all available bitcoins. This is in contrast to market capitalization, which is the total number of bitcoins times their current value. If the realized limit exceeds the market cap, it indicates that the entire market is experiencing a profit.

2. Cointime destroyed

The calculation for coin time destroyed involves multiplying the daily transactions of coins by the length of time they have been stored. Essentially, it reveals the rate at which a cryptocurrency is traded. An increase in coin time being destroyed indicates that investors are selling their coins and making a profit.

3. HODL waves

You may be aware that ‘hodl’ is a cozy nickname for investors who choose to hold their cryptocurrencies for a long time instead of trading regularly. HODL charts illustrate the bitcoin values ​​held today, starting with amounts held for less than one month to those held for more than seven years. For example, from December and January there was an increase in currencies for more than seven years, showing that ‘hodlers’ are coming to the network.

4. Provide in profit and loss

The balance between earnings and expenses reveals the amount of coins that are either making a profit or suffering a loss, relative to their purchase cost. In a growing market, there will be a greater number of coins generating profits than those experiencing losses.

5. Thermal capitals

Term capitalization refers to the amount of cryptocurrency that miners receive for confirming transactions on the network. When viewed together with the market cap, a drop in the term cap indicates that the influence of miners on the price is decreasing as the supply of cryptocurrencies from them decreases.

6. Realized gains and losses

Gross profits and losses track the monetary value of bitcoins sold either at a profit or a loss. For example, if a bitcoin was bought for $10k and then sold for $50k, that would be considered a $40k profit.

If you regularly buy and sell cryptocurrencies, it’s important to stay on top of market movements. The following indicators can help to understand the current market trends.

1. Stablecoin Supply Ratio (SSR)

The Stablecoin Supply Ratio compares the amount of a cryptocurrency’s total supply to the supply of stablecoins. In other words, it reveals how much its value is accumulated over a short period of time. No matter if you are bullish and plan to hold for months or even years, or bearish and intend to flip coins in minutes or hours, these tools that can be implemented on the blockchain can help you bring you up to date with information and therefore help you make better decisions.

Blockchain analytics is a relatively new area that has yet to be fully explored, meaning that those who get in early have a competitive advantage in the market. In addition, it highlights the strength of a financial system that is open and transparent.

2. Market value to realized value (MVRV)

Market value to realized value (MVRV) measures the comparison between the market capitalization and the realized capitalization. For example, a significant MVRV for bitcoin has traditionally signaled that its price has reached its peak, while a minimal ratio has suggested that the price is near its trough.

3. Inventory-to-flow ratio

The supply-to-flow ratio serves as a framework for predicting the value of bitcoin should demand continue to rise. For example, it suggests that should bitcoin’s use continue without interruption, it could reach AU$1 million per coin by the year 2025.

4. Network Value to Transaction (N/A)

The Network Value to Transaction Ratio evaluates the market capitalization relative to the transaction activity. It serves as the closest equivalent in the cryptocurrency world to the price-to-earnings ratio used in conventional finance. Essentially, it seeks to determine the intrinsic value of the network compared to its prevailing market price. A low N/A indicates a pessimistic outlook, while a high N/A indicates an optimistic outlook.

On-chain market statistics are a crucial tool for any investor in the cryptocurrency space who wants to maneuver through the intricacies of the market. As the cryptocurrency market develops and becomes more sophisticated, the importance of analyzing statistics on the blockchain will surely increase in developing effective investment plans.

To analyze crypto market trends, start by examining historical price data and chart patterns to identify trends and potential reversals. Use technical analysis tools such as moving averages, the Relative Strength Index (RSI) and Bollinger Bands. Monitor market sentiment indicators including news, social media trends and trading volumes. Stay abreast of regulatory news and macroeconomic factors affecting the market.

On-chain activity in crypto refers to all transactions and operations recorded directly on a blockchain. This includes cryptocurrency transfers, smart contract executions and interactions with decentralized applications (dApps). On-chain data provides insights into network usage, transaction volumes, and overall blockchain health and activity.

Use blockchain explorers like Etherscan for Ethereum or Blockchain.com for Bitcoin to get data in the chain. These platforms provide transaction details, wallet activity and network statistics. In addition, APIs from services such as Glassnode or Chainalysis provide more comprehensive and customizable on-chain data for in-depth analysis and insights.

A leading indicator in crypto is a measure that predicts future market movements. Examples include trading volume, open interest in futures contracts and on-chain statistics such as active addresses and transaction counts. These indicators help predict price trends and market sentiment before changes occur.

Onchain metadata refers to data embedded directly in a blockchain transaction that provides additional context or information about that transaction. This may include details about assets, ownership or specific conditions relating to the transaction. This ensures transparency and traceability, improving the usability and functionality of blockchain applications.