What is On Chain Analysis in Crypto Analysis?

We know that anyone who actively invests in cryptocurrencies and follows a little technical analysis has heard of ten chain data. Almost all people and institutions that analyze crypto money use and analyze this data. So what is this on-chain analysis? Before we start to define it, it is useful to know what Bitcoin (BTC) and the blockchain mechanism mean.

In order for blockchain transaction data to be fully public and transparent, it is necessary for analysts to know that this information is used at a given time to measure the transaction activity and utility of the network. So by collecting and analyzing on-chain data in bitcoin and the cryptocurrency system, crypto investors can learn about the general feelings and behaviors of others on the network.

What is On Chain Data?

It contains information of all transactions taking place on a particular blockchain network. That is, a blockchain contains all the information written to the blocks. Since the blockchain network is open to everyone, this information is available for anyone to see. Data can be broadly classified into three different categories:

  • Transaction Data (sending and receiving address, amount transferred, residual value for a specific address)
  • Block Data (timestamps, miner fees, rewards)
  • Smart contract code (i.e. business logic coded on a blockchain)
On Chain Analysis and Metric

For the on-chain analysis of Bitcoin and other cryptocurrencies, it is necessary to be able to look at various metrics. Traders and investors often pair on-chain analysis with technical analysis to determine suitable short-term entry and exit points for crypto assets. In other words, it is not a speculation-based trade here, but it will help you to make more accurate short or long targeting by reaching an interpretation as a result of these regularly and consistently shared metrics and analyzes. Now I want to tell you about 8 metrics that will be useful for analysis.

  • Current Price Monetizers: The first metric defines the average cost at which addresses with balances are purchased and compared to the current price. If the current price is higher than the average cost, the address is called “In the Money”. If the current price is below the average cost, the address is called “Money Out”. It is calculated according to the percentage of the investor who enters and leaves the money.
  • Concentration on Big Players: This metric shows the measurement of addresses that own more than 1% of the total supply on on-chain data and the percentage that large investors hold in the supply. By big players here, we mean crypto money whales. Measuring where large volumes of transactions are concentrated is useful most of the time, but not at times.
  • Price Correlation with Bitcoin: This metric provides a 30-day correlation of a crypto asset with bitcoin, the flagship of cryptocurrencies. For example, during the periods when Etherium is on the rise, the price correlation metric with bitcoin has been used a lot. This is a one-to-one method for measuring the performance of other assets against bitcoin.
  • The composition of the owners according to the period of keeping: This on-chain metric expands the framework of analysis by making various classifications here according to the amount of time the investor holds that coin. In other words, each address holding the asset is divided into 3 time frames: the Trader for up to 1 month, the cruiser for 1-12 months, and the self-holder for 1+ years is called the hodler. In this way, the money is used to determine the future value of that money. For example, the retention period for bitcoin is longer than usual.
  • Tracking of Transactions Greater Than 100K: This metric shows us more than $100,000 worth of transactions in the last week. This is as important a metric as whale tracking.
  • Process Demographics: The main reason for using the term demographics here is that the transactions between the eastern time zone and the western time zone in the last 2 weeks show the ratio of each other. Therefore, east is one of the leading metrics in taking action according to the west news flow.
  • Total Exchange Inflow: It is the metric that shows the volume of funded crypto money invested in the leading crypto money exchanges in the last 7 days.
  • Total Exchange Outflow: It is a metric type that shows the volume of crypto money coming out of crypto money exchanges in the opposite way to the above metric.
Places to Track On Chain

The amount of energy, time, and money required to run a node, store it, and maintain a copy of an entire blockchain is not within the reach of every individual or organization. It takes a lot of energy and effort to display the captured data and metrics on a platform as well. Fortunately, in the last few years, different companies have emerged that offer on-chain and off-chain data to users. Here we share with you the 3 most popular ten chain companies;

  • Glassnode
  • CryptoQuant
  • IntotheBlock