Public blockchains like Ethereum, Solana, and Bitcoin are transparent digital ledgers that can be verified by anyone at any time. Such transparency opens a new paradigm in trading and investing. It allows you to track trades and transactions in real time, providing a deep understanding of market activity.
Consequently, traders who use network analytics effectively can make more informed decisions and spot opportunities at an early stage.
The difference between technical analysis, on-chain analysis and fundamental analysis
Fundamental analysis
Fundamental analysis seeks to understand an asset by considering multiple aspects such as its market capitalization, trading volume, its utility, the number of owners and the authenticity of the team behind it. This analysis is necessary to determine whether an asset is overvalued or undervalued.
Technical analysis
Technical analysis is a method of visual analysis, interpretation and forecasting of price movements using historical patterns and statistics in order to find potential trading opportunities. Technical analysis is based on the assumption that price movements exhibit certain patterns that tend toward historical consistency and may be statistically probable.
Onchen analysis
On-chain analysis looks at verified and recorded data on the blockchain to predict trends and gauge market sentiment. In other words, on-chain research involves monitoring how funds move in the blockchain to identify potential investment opportunities.
This is a unique method for cryptocurrencies as other asset classes do not use public registries. You can perform chain analysis to determine why different market participants buy or sell a particular asset. Below is an example.
With an on-chain analysis platform such as Glassnode, you can view the various activities of BTC investors. For example, do they actively contribute assets to centralized exchanges (CEX) or withdraw them to decentralized wallets.
A high inflow on CEX indicates the possibility that they will sell their assets, while a high inflow on decentralized wallets means that they plan to hold them for a while.
Onchain data types
Onchain data is all the information recorded in the blockchain. This data includes transaction details, wallet addresses, block information and other metrics related to network activity:
- Transaction data: Details about individual transactions, such as sender and receiver addresses, transaction amounts, and timestamps.
- Wallet data: Information on account balances and address activity to help identify large holders or significant movements of assets.
- Block data: Detailed information about blocks, including block size, reward to miners/validators and number of transactions in each block.
- Smart contract data: For blockchains that support smart contracts, this data includes interactions with decentralized applications (dApps) and protocols.
The importance of on-chain analysis
Chain analysis can provide several benefits for those involved in the cryptocurrency markets:
- Transparency: Blockchain data is publicly available and immutable, providing a high degree of transparency. This allows users to independently verify transactions and other activities.
- Market sentiment: By analyzing wallet movements and transaction volumes, traders can gauge market sentiment and make predictions about future price movements.
- Identifying trends: Long-term trends can be detected by studying historical data in the chain, which helps to build investment strategies.
- Detection of anomalies: Chain analysis can help detect unusual activity, such as large transfers or sudden changes in transaction volumes, which may indicate market manipulation or other important events.
Chain analysis has various practical applications in the cryptocurrency space. It helps traders, investors and analysts to understand market dynamics and the state of the network. Here are some common use cases for in-chain analysis:
- Whale watching: monitoring the addresses of large wallets to understand the behavior of their owners, also known as whales, and how their actions can affect the market.
- Detection of exploits, hacks and fraud: Analysis of the chain can reveal unusual patterns or transactions that indicate a security breach, allowing for timely response and informing the cryptocurrency community, protecting assets and mitigating losses.
- Network status: Assessing the overall state of the blockchain by examining metrics such as transaction volume, network fees, and the number of active addresses.
- Compliance and Security: Help with regulatory compliance and enhanced security measures by tracking the flow of funds.
Top 3 tools for online data visualization
Glassnode
Glassnode is one of the most popular on-chain analysis tools. Widely known for its comprehensive market indicator reports for various digital currencies, Glassnode has many applications with revolutionary ways to stay on top of crypto trading.
Its real-time data presents multiple graphs and dashboards with deep insights into wallet activity, balances, network growth, token supply, number of owners, and more.
Main features:
- Multiple market indicators for over 900 assets.
- Over 200 metrics.
- Customizable dashboards with functionality to include more metrics.
- Comparison of different indicators for available assets.
- Integration with TradingView.
- In-depth resources on popular networks and assets.
Pricing:
Glassnode supports the following price packages:
- Standard – Offers the simplest chain analysis and market metrics for crypto enthusiasts. It’s free.
- Advanced – Provides updated blockchain market indicators and futures data for ambitious investors. It costs $29 per month, is billed annually, and comes with a 14-day free trial.
- Professional – Offers the most up-to-date and up-to-date blockchain and futures market data for experienced traders. It costs $833 per month, paid annually.
- Institutional — individual plan for institutions.
Dune
Dune is another popular on-chain analytics tool to look out for. Unlike other analytics tools that require new scripts, you can query the Dune database to gather almost any information on the chain.
Dune is known for querying the Ethereum blockchain using simple SQL queries. Overall, the platform provides all the necessary tools to query, extract and display large volumes of blockchain data.
Main features:
- Easy to digest information and visualized charts and graphs.
- Access to many metrics.
- The platform extracts data from the chain and classifies it into queryable SQL databases.
Pricing:
Dune Analytics offers three service levels: Free, Plus and Premium. A Plus subscription costs $349 per month, while the premium tier currently sells for $849 per month. Users with paid subscriptions receive more credits, allowing them to create even more renderings per month. They also get other perks like more CSV exports per month.
Nansen
Unlike Glassnode and Dune, Nansen combines blockchain data with over 250 million wallets to offer on-chain analytics. While Nansen is ideal for professional crypto investors looking for in-depth on-chain analysis, beginners can also use it to learn more about digital currencies.
Main features:
- 250 million wallet tokens.
- Advanced dashboards.
- Wallet Profiler, ETH Tracker, Decentralized Exchange (DEX) Trading and CSV Data.
- Customizable smart notifications.
- Customized reports.
- Real-time data for popular networks such as Ethereum, BNB Smart Chain and others.
Pricing:
Nansen offers several tariff plans to suit different user needs and budgets. The Basic plan provides access to basic features, while the Standard and Professional plans offer more advanced tools and data.
- Basic plan: Access to basic wallet data and analytics, Smart Money tracking and limited token analysis.
- Standard plan: All features of the Basic plan, plus advanced analysis of tokens, NFT data and hot contracts.
- Pro Plan: All the features of the Standard plan, plus advanced analytics, custom alerts, and priority support.
In an era where data is the new oil and blockchain is transforming digital value, it is necessary to pay attention to the importance of on-chain analysis. Many platforms have emerged that offer crypto investors numerous easy-to-use on-chain indicators and datasets.
However, the information and alerts you receive from these tools are only intended to help you make wise investment decisions—they are not infallible.
