On-chain Data Analysis — A Crucial Tool to Evaluate the Market and Make Reasonable Investment Decisions
If you are interested in blockchain technology, you may come across terms like on-chain data, on-chain transactions, on-chain analysis, on-chain metrics, etc. So, what is on-chain data? Why is on-chain data a powerful tool to analyze the crypto market for all investors? Let’s find out in this article.
An overview of on-chain data analysis
On-chain data refers to all information that has been recorded on a blockchain’s blocks, or, to put it another way, all information related to all transactions that have ever taken place on a certain blockchain network.
Investors may analyze the movement of the cryptocurrency market using on-chain data analysis. Besides, they can access the money flow in the market and make wise investment decisions by employing this method.
On-chain data includes:
- Transaction data (e.g. sending and receiving address, transferred amount, remaining value for a certain address)
- Block data (e.g. timestamps, miner fees, gas fee, reward)
- Smart contract (e.g. add liquidity, participate in the administration)
The importance of on-chain data analysis
Because cryptocurrency and blockchain data are transparent, on-chain analysts have a tremendous potential to construct more complete views of the crypto market based on solid facts as well as a fundamentals-driven approach rather than being solely motivated by hype.
- Definitely accurate information: On-chain data can be considered the most reliable source of blockchain information on the market due to its accuracy, objectivity, and transparency.
- Keep track of real-time market activity: Investors can watch the behavior of objects in the market, particularly with the use of on-chain data. This is crucial when monitoring the activities of Whales, who have access to an abundance of financial and informational resources to control the market.
- Forecast market situations and make reasonable investment decisions: Investors may foresee issues and stay one step ahead of the community by continuously updating the on-chain information because information on communication channels typically comes later.
- Analyze investor behavior: On-chain analytics also give information about specific investment behavior. On-chain analysts, for example, can check the length of time an address has not transferred a coin and the number of people HODLing the cryptocurrency. If the number of investors HODLing the cryptocurrency grows, it may imply that the circulating supply of the cryptocurrency is decreasing. On-chain analysis of this circumstance indicates that if demand remains constant, the price of that coin should rise. Furthermore, it demonstrates belief in the asset’s future performance.
Some useful tools to check on-chain data
Currently, various on-chain analytics platforms are either free or at least offer plenty of free features that can provide you with useful, real-time, and accurate information.
- The Block: You can access a wealth of statistics in the Data area, including Spot and Future transaction volume, the amount of Bitcoin and Ethereum, moving in and out of exchanges, etc.
- CryptoQuant: focuses on Bitcoin, Ethereum, and stablecoins
- Glassnode: provides quite a bit of information related to BTC On-chain data.
- IntoTheBlock: covers price information, transaction activity, costs, provides insights into profitability / the monetary value of transactions, etc.
- Blockchain Explorer: provides detailed information about transactions (e.g. Etherscan, Bscscan, Solscan, etc.)
- Dune Analytics: enables users to access, analyze, and visualize decoded Ethereum smart contracts into self-explanatory graphs and reports.
- Dappradar: tracks over 3,000 Dapps in real-time.
Notes for analyzing on-chain data
While on-chain data has many advantages, there are several considerations that investors should make while undertaking on-chain data research.
- Require knowledge and experience: Users need to possess both baseline knowledge and multidimensional viewpoints to effectively assess and forecast using the on-chain gathered data.
- Regular updates: Information needs to be updated frequently since market behavior is ever-changing.
- Combine with a variety of information sources: To make the most accurate evaluation, users need to compare and contrast data from a diverse range of sources, as there are presently many tools available on the Internet that give On-chain data.
- Note to the data from the project’s website: Users should double-check the data supplied by the project because they are occasionally not entirely accurate (due to a variety of common factors like marketing).
In conclusion, on-chain data analysis is a very helpful tool for assessing the market and assisting individuals in making wise decisions. However, the cryptocurrency market will continue to fluctuate both daily and hourly. To control risk and thrive in the market, everyone should maintain track of on-chain data and constantly advance their knowledge and experience.
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