On chain analysis is one of the most popular mechanisms that you can use to your benefit and gain deep insights into the world of crypto. While the crypto industry is gaining in popularity and the stories of massive profits seem enticing, no decision must be made without thorough research.

Performing on-chain analysis can become one factor of your research that can solidify your understanding to a deeper level. however in order to efficiently do this analysis you will need a knowledge of the basics and the power of some valuable tools.

In this article, we take you through the introductory fundamentals of on-chain analysis and the best tools you can use for it.

What is On-chain Data?

On-chain data, as the name suggests, is data that is stored on a blockchain network. A blockchain is a secure and transparent digital ledger that records and stores information in a decentralized manner. This type of data includes all information and transactions that are recorded on the blockchain, such as transaction history, token balances, and smart contract codes.

Additionally, on-chain data also includes details of each transaction, including sending and receiving addresses, transferred funds, wallet addresses, transaction fees, and circulating funds for a particular address.

One of the main benefits of on-chain data is its immutability. Once the data is recorded on the blockchain, it cannot be altered or deleted, making it a trustworthy source of information for those looking to understand the behaviour of cryptocurrencies and make informed investment decisions.

This data can provide a significant amount of insight into the workings of cryptocurrencies, including information on transaction volumes, network activity, and token distribution. By analyzing this data, individuals can gain a deeper understanding of the market trends, adoption rates, and network health of various cryptocurrencies.

What is On-chain Analysis?

On-chain analysis is a method of evaluating the data stored on a blockchain network. The goal of this type of analysis is to gain a deeper understanding of the behaviour and performance of cryptocurrencies, by examining various aspects of blockchain activity, such as transaction volumes, network activity, token distribution, and more.

Through the use of various tools and techniques, such as data visualization, statistical analysis, and machine learning algorithms, on-chain analysis aims to uncover trends, patterns, and relationships within the data. This information can then be used to make informed investment decisions and stay ahead of market trends.

On-chain analysis offers valuable insights into the cryptocurrency market, including market trends, adoption rates, and network health. It also provides a comprehensive view of the activity and behaviour of different cryptocurrencies, making it useful for investors, traders, and anyone interested in the market.

Moreover, on-chain analysis can be used to assess the security and reliability of a cryptocurrency network. For instance, it can help identify malicious actors or potential network vulnerabilities, helping to ensure that investments are secure.

By combining indicators with technical and fundamental analysis, on-chain analysis provides a more thorough approach to trading strategies. It is a valuable tool for anyone looking to invest in cryptocurrencies or gain a deeper understanding of the market.

Metrics that On-chain Data Provide

On-chain analysis utilizes various metrics to measure different aspects of a blockchain network and its associated cryptocurrency. The following are some of the most common metrics used in on-chain analysis:

Network Value to Transactions (NVT): A ratio of the network’s market capitalization to its daily transaction volume, used to measure the economic efficiency of a cryptocurrency.
Realized Cap: The total value of all coins at their last moved price, used to measure the market’s expectation of future price movements.
HODL Waves: A measurement of the number of coins that have not been moved for a certain period of time, used to determine the level of long-term investment in a cryptocurrency.
Coin Age Consumed: The amount of time that a coin has been held before it was spent, used to measure the level of demand for a cryptocurrency.
Active Addresses: The number of unique addresses that have participated in transactions within a specified period of time, used to measure network adoption and usage.
Transactions per Day: The number of transactions processed on the network in a given day, used to measure the level of usage and adoption of a cryptocurrency.
Hash Rate: The computational power of the network, used to measure the security and stability of a cryptocurrency.
Difficulty: A measure of how difficult it is to mine new blocks on the network, used to assess the security and stability of a cryptocurrency.
Block Time: The time it takes for a new block to be added to the blockchain, used to measure the speed and efficiency of the network.
TVL: TVL, or Total Value Locked, is a metric used in the cryptocurrency industry to measure the total value of assets that are locked into DeFi (decentralized finance) protocols. TVL represents the aggregate value of all cryptocurrencies, stablecoins, and other assets that have been deposited into DeFi protocols, such as lending and borrowing platforms, yield farming platforms, and exchanges. By measuring the total value of assets locked in DeFi, TVL provides a snapshot of the current activity and growth of the DeFi ecosystem. TVL is often used as a benchmark for the success and popularity of DeFi protocols, with a higher TVL indicating a larger user base and more widespread adoption. However, it’s important to note that TVL can be influenced by factors such as the price of cryptocurrencies, market sentiment, and incentives offered by DeFi protocols, and may not necessarily reflect the long-term viability or profitability of a DeFi protocol.

These metrics can be used in combination to gain a more complete picture of the health and performance of a cryptocurrency network. By analyzing these metrics, traders and investors can make informed decisions about their investments and assess the potential risk and reward of a given cryptocurrency.

Best Crypto On Chain Analysis Tools in 2023

Dune

Dune is a platform that provides crypto data insights into the Ethereum blockchain. It offers a simple and convenient way to visualize and share information with the community. The platform allows users to query Ethereum data using SQL queries from premade databases, giving them access to a vast amount of blockchain information without needing to write a new script.

The platform features both queries and dashboards, which are key to its functionality. It includes a variety of premade dashboards that focus on different aspects of the Ethereum blockchain, and users can also create their own queries. This makes it easy to access previously compiled data or to start fresh with new research.

Key features:

Dune provides pre-made dashboards with insightful information on various aspects of the Ethereum blockchain.
The platform offers access to a range of metrics for on-chain data analysis. It features visually appealing and categorized queries that enable users to quickly find what they’re looking for.
Users can create custom dashboards by combining multiple queries.
The platform enables the collection, visualization, and sharing of data, and offers the option to export results to CSV (available with the PRO plan).

Drawbacks:

Dune provides extensive information, however, it is criticized for having a subpar user interface and limited chart editing options. Additionally, it is considered expensive compared to other platforms that offer high-quality data.

Pricing

Dune offers a free package with features such as custom dashboards, chart sharing, and a limit of three queries. For more advanced features, the company also provides a pro tier at a cost of $390 per user per month, which includes instant query access, up to six query options, and additional features.

Glassnode

Glassnode is a tool designed to provide insights into the cryptocurrency market through on-chain analysis and indicators. Launched in 2018, Glassnode helps crypto traders in their research by providing market intelligence and data, making it ideal for deep analysis of market indicators for various cryptocurrencies and keeping track of market changes.

Glassnode offers a comprehensive look at these indicators and fundamental metrics for various entities such as wallet addresses, exchanges, miners, institutions, and OTC desks. The platform features multiple applications that allow users to stay updated on market fluctuations, including access to detailed charts and dashboards through its live data explorer. In addition, Glassnode’s extensive metric library can be used to monitor advanced on-chain metrics, helping users to understand market movements and make informed decisions.

Key Features

Glassnode provides a variety of on-chain market indicators for multiple cryptocurrencies
It offers the ability to customize dashboards with preferred metrics for specific coins.
It integrates with TradingView and offers access to over 200 metrics with more than 10 years of historical data.
The platform provides extensive resources for various popular blockchains and cryptocurrencies and the ability to compare different metrics for different coins.

Drawbacks

Glassnode lacks alert features and may be challenging for new and casual investors to understand. It also does not offer a watchlist feature.

Pricing:

Glassnode provides various pricing options for its users, with three distinct plans available. The options include a free package, an advanced plan that costs $29 per month with an annual payment or $39 with a monthly payment, and a professional plan that is priced at $799 per month with an annual payment.

Etherscan

Etherscan is a platform that offers insights and analytics for the Ethereum blockchain. It provides access to current transaction data, including authorised and pending transactions. Etherscan aims to increase Ethereum’s usability and accessibility for a larger audience. You may learn more about the Ethereum ecosystem with the help of this tool. It is renowned for its capacity to follow and keep an eye on the activity of transactions on the Ethereum blockchain, assisting users in spotting any fraud and suspicious conduct. Users may search for information on wallet addresses, smart contracts, and other on-chain data using Etherscan, which also allows them to examine the specifics of every transaction on the Ethereum blockchain.

Key features

The technical reports available from Etherscan give in-depth details regarding the Ethereum blockchain.
It gives you the opportunity to follow developments and spot early airdrops, for example.
It enables the establishment of personalised alerts for critical transactions and occurrences.
Additionally, Etherscan offers analytical tools for assessing tokens, smart contracts, blocks, wallets, transactions, and other elements of the Ethereum network.
The platform has functions including a tracker for gas fees, notifications for incoming transactions and activity from significant holders, the option to create data feeds, and the ability to monitor assets stored in open Ethereum wallet addresses.
Another function that is provided is portfolio management.

For example: Let’s do an On chain analysis Polygon on Etherscan.

If we look into number of Polygon holders on Ethereum network, we can see the number of holders are increasing, and as of today, there are around 588834 number of Polygon (Matic) holders on chain.

It also gives a comprehensive idea on the concentration of the holders.

We can see that the top 100 MATIC holders collectively possess 8,552,068,509.10 Tokens (out of 10,000,000,000) i.e 85.52% of total number of coins.

Pricing

Etherscan offers multiple paid plans in addition to a free version. The three paid plans include Standard, Advanced, and Professional, with monthly prices of $199, $296, and $399 respectively. Each plan offers a different level of access to features and functionality, allowing users to choose the package that best fits their needs.

Drawbacks

Etherscan does not provide any means of community engagement or communication. The platform offers limited educational resources and information, making it appear simplistic and lacking in versatility. Although it may provide accurate data, its toolset is narrow and does not offer a broad range of options.

Nansen

Nansen is an established blockchain analytics software. It offers comprehensive insights into on-chain data. Nansen serves both seasoned cryptocurrency experts and new investors looking to better grasp their digital assets. To provide a thorough picture of cryptocurrency transactions and activity, it integrates on-chain data with wallet labels.

The platform is accessible to a wide range of users because to its user-friendly dashboards, SQL queries, and APIs. With Nansen, you can track the flow of your money, look through a huge selection of wallet labels, stay up with emerging trends, get personalised alerts for significant events, and more.

Major blockchains supported by Nansen include Fantom, Polygon, Binance Smart Chain (BSC), Ethereum, and Binance Smart Chain (BSC). It is a helpful resource for both crypto specialists looking for in-depth analysis and newcomers.

Key features

Nansen offers a wealth of data by analyzing over 70 million wallet labels
Its features, including Wallet Profiler, ETH Tracker, DEX trades, and CSV data, are highly sought after by users.
With Nansen, you can track exchanges, token teams, and funds, and use its analytics to identify patterns and predict price movements.
The platform also features adjustable smart alerts and discovery tools for new projects, tokens, and NFTs.
By analyzing millions of wallet labels, Nansen provides valuable insights into various crypto assets
Its visual dashboards help users stay up-to-date on emerging trends in the DeFi, NFT, and DAO spaces.

Pricing

Nansen provides a free option for its users, as well as three paid packages – Standard, VIP, and Alpha. The pricing for the Standard package ranges from $100 to $150 per month, based on the billing cycle. The VIP plan is priced at $1000 per month, with an annual billing option, while the Alpha package costs $2000 annually.

Drawbacks

Nansen is an advanced platform for analyzing blockchain data and may not be ideal for smaller, retail investors due to its hefty price structure. The tool provides comprehensive and valuable insights, especially when it comes to on-chain metrics. However, Nansen’s target audience is primarily large wallets, institutions, and professional users.

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CryptoQuant

CryptoQuant is a platform for analyzing blockchain assets, including Bitcoin and Ethereum, through the provision of on-chain data and market insights. It provides access to market data and analytics through API or other data tools. The platform offers a variety of examination devices, such as real-time transaction information, network displays, and market signals. Additionally, it provides comprehensive data, including on-chain statistics and short and long-term indicators, for well-known crypto assets like Bitcoin, Ethereum, stablecoins, and ERC20 tokens.

Key features

CryptoQuant offers a set of analytical indicators, known as the “Quant” suite, that reveals information about the performance of crypto markets by analyzing on-chain data.
The platform also has a feature to detect potential scams and alert users.
It provides various charts and metrics, including Flow Indicator, Miner Flow, and more, with access to exchange overflow data and customizable alerts.

Pricing

CryptoQuant offers a complimentary version that includes an assortment of metrics. Additionally, it provides three premium plans – Advanced, Professional, and Premium – costing $29/month, $99/month, and $799/month respectively.

Drawbacks

One of the major drawbacks of Cryptoquant is its lack of variety in the free pricing and lack of advancement in the communication features.

I will be adding more On chain analysis tool, that will help you select the best crypto and understand what is happening behind the scenes.

Token Terminal

Token Terminal emerged in 2022 as a groundbreaking platform that accesses information from leading blockchains and dApps and amalgamates that monetary data in one place. This platform empowers users with the ability to juxtapose historical data of diverse DeFi projects and monitor the latest developments in the crypto sphere.

The market insight provided by Token Terminal is unambiguous, and precise in order to facilitate speedy comprehension of contemporary industry movements and investment evaluations. Token Terminal is equipped to track and aggregate historic data for a huge array of aspects and standards. Some metrics provided by the platform include the most profitable yield-generating projects, Total Value Locked, general earnings, and price-to-sales ratio.

Key features:

It uses financial metrics to help you explore novel products and protocols in the industry
It represents all data and information in a visual form and gives a comprehensive understanding of the past performance of the project
You can sort data according to daily, weekly or monthly filters
Employs high standard barometers to compare and analyse a project
Has a holistic TVL dashboard

Drawbacks:

Even though Token Terminal is a well-ideated product with an extensive range of features, it is still a relatively new platform. Hence a lot more developments nad reliability are yet to be accomplished.

Pricing

Token Terminal currently has three pricing structures in place: Lite, Pro, and Enterprise. The Lite Plan is absolutely free and provides information that is summarised along with leaderboards. The Pro Plan is available at around 325 euros with a monthly time span. This plan offers some more benefits such as access to all details, commerce graphs and tables, export options, and priority support. The Enterprise Plan is in a beta stage and so doesn’t really have a fixed price point but users can opt to receive a demo so that they get a better experience of the pan.

FAQs

What is the difference between On chain Analysis vs Off Chain Crypto Analysis?

On-chain analysis and off-chain analysis are two methods used to analyze cryptocurrency data and make predictions about the future of cryptocurrencies.

On-chain analysis focuses on data that is publicly recorded on a blockchain and can include information such as transaction volume, number of active addresses, and the distribution of coins among addresses. This type of analysis is useful in understanding the underlying fundamentals of a cryptocurrency and how it is being used.

Off-chain analysis, on the other hand, looks at data that is not recorded on the blockchain, such as social media mentions, news articles, and developer activity. This type of analysis can provide a more comprehensive view of a cryptocurrency and its ecosystem, including market sentiment and adoption trends.

On Chain Analysis vs Technical Analysis: Which is better?

On-chain analysis provides a deep understanding of the underlying fundamentals of a cryptocurrency, such as transaction volume, number of active addresses, and the distribution of coins among addresses. This information can be used to make informed predictions about the future of the cryptocurrency.

Technical analysis, on the other hand, uses chart patterns and trends to make predictions about the future price movements of a cryptocurrency. This type of analysis is based on the assumption that past price movements can indicate future price movements.

In some cases, a combination of on-chain and technical analysis can provide a more comprehensive view and increase the accuracy of predictions. However, it’s important to remember that neither on-chain analysis nor technical analysis can predict the future with 100% accuracy, and both methods have their own limitations and risks.

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Filed under: News - @ March 3, 2023 3:36 pm