Cryptocurrency is a relatively young and unlike anything else type of asset. In this regard, the analysis of information on it requires original ways to evaluate the data, and one of them is on-chain analysis.

What is on-chain analysis

When analyzing traditional instruments such as stocks, bonds and currency pairs, two types of analysis are used: fundamental and technical. The first includes the study of specific economic data, for example, financial statements, as well as circumstances that influence a particular instrument: the economic sphere, political decisions, weather disasters, and so on.

Technical analysis is the study of the price chart of an instrument with or without the use of various trading indicators. It also applies to digital assets, however, cryptocurrency is a relatively new and unique product that exists only on the Internet, so its analysis needs to be carried out on another level. It is the operation of the network and on-chain analysis is used to analyze it.

On-chain analysis can be applied regardless of which cryptocurrency is being considered – based on the Proof-of-Work (PoW) or Proof-of-Stake (PoS) algorithm. This is explained by the fact that the basis of any such asset is the blockchain. With the help of on-chain analysis, conclusions are drawn about how the operation of the blockchain in each specific case is reflected in the price of the asset.

But is it really that important and is it possible to use the methods of technical and fundamental analysis?

The Importance of On-Chain Analysis

Of course, no one limits an investor or trader in choosing the appropriate tools and methods for assessing information. You can not analyze it at all, but simply buy any hype “shieldcoin”/memecoin, being fooled by flashy advertising. But in this case, the chances of earning money are quite scanty, although not zero.

On-chain analysis allows traders to expand their trading arsenal and, by and large, is part of fundamental analysis in the field of cryptocurrencies. The fact is that when analyzing a business, its financial performance is examined over a certain time period. There is no such thing in cryptocurrency, but there is a blockchain and everything connected with it. And this, in fact, is the core of any digital asset.

On-chain indicators

Cryptocurrency may be united by the basic principles of blockchain, but serious projects are fundamentally different even within the similar concept of decentralized money. Therefore, the approach to this type of analysis will vary depending on the specific coin chosen. Although some general metrics are still worth highlighting.

Active addresses

Active addresses show how many participants are involved in the network. The more there are, the better, as it demonstrates the popularity of a particular platform. If their number decreases, then this is a negative signal. You can analyze the dynamics of this indicator over almost any period of time – from several days to several months. One resource where you can evaluate active addresses is Etherscanproviding comprehensive data on Ethereum.

Number of transactions on the network

Another indicator is the number of transactions carried out on the network over a certain time. The meaning here is the same as in active addresses: the more transactions with a particular cryptocurrency, the greater its popularity. You can find such data on any portal that explores this blockchain. On Etherscan this can be done in tab “Ethereum Daily Transactions Chart”.

Hashrate

Hashrate is a characteristic that shows the total computing power of the equipment involved in mining and, therefore, in the process of confirming transactions in cryptocurrency blockchains using the PoW algorithm. The higher it is, the more participants are involved in the mining process, and the more decentralized the network is. In this case, the ownership of a share of equipment in specific pools is not considered, which can also be an important evaluation criterion, since the activities of the pool, for example, may be carried out in a jurisdiction that has over time banned mining.

In general, the presence of a stable and extensive network of devices that provide high hashrate is a positive factor for specific coins. Additionally, it shows that interest in the coin is growing. You can find data on hashrate, including on Bits.media.

Total Value Locked

Total Value Locked (TVL) is an indicator of the total locked value, showing how much cryptocurrency is locked in smart contracts or decentralized applications (dApps) on the blockchain. The higher the indicator, the greater the demand for the underlying asset. In addition, if the number of applications being deployed on the blockchain increases, this indicates that developers like the platform.

TVL can be assessed both dynamically and in comparison between different cryptocurrencies. One of the most popular resources that provide information on this indicator is DefiLlama.

Exchange Reserve

Exchange Reserve shows the amount of a specific cryptocurrency held on the exchange. This indicator gives an idea of ​​how much coins can be sold. The more cryptocurrency there is on exchanges, the greater the chances of the rate falling, and the less there is, the more likely the value is to rise. You can view data on this indicator on the portal CryptoQuant.

All of the above are just some of the most popular on-chain indicators. In general, there are a huge number of them. Typically, different analytics platforms try to provide their own unique assessment tools. Let’s look at the most popular platforms that provide access to on-chain data and analytics.

Platforms for on-chain analytics

Nansen

Platform Nansen, specializing in on-chain analytics, is named after the Norwegian explorer Fridtjof Nansen. More than 300 million wallets and more than ten blockchains fall into its field of view. Here you can see data on the coin, such as its distribution, balance on exchanges and the largest transactions. In addition, information about wallet profiles is provided here: when you enter an address, you can see its balance, activity, as well as associated addresses. NFT data deserves special mention: information about collections, price range, top buyers, and more. A very convenient feature of the platform are notifications that can be configured for any messenger.

Not all of the resource is free – full functionality is available only after payment. There are three paid subscription options: monthly, quarterly (with a 17% discount) and annual (with a 33% discount). There are three tariff plans: Standard, VIP and Alpha. The average monthly cost for them is:

  • for monthly payments: $150, $1,500 and $3,000 respectively;

  • for quarterly: $125, $1,250 and $2,500;

  • for annual: $100, $1,000 and $2,000.

Glassnode

Glassnode is a well-known Swiss platform providing on-chain data. There are thousands of different metrics for Bitcoin, altcoins, NFTs and more. In addition, the site constantly offers its own research, which is based on information from various blockchains.

Like Nansen, Glassnode has paid content. At the same time, for a business you will have to request the price yourself: it is not freely available. There are two tariff plans for private investors: Standard and Advanced. The first of them is free and only the most basic metrics are available for it. The cost of the second will depend on which option you choose to pay: monthly or annually. In the first case you will have to pay $39, in the second the price per month will drop to $29. The Advanced tariff plan allows you to access the full functionality of Glassnode.

IntoTheBlock

IntoTheBlock is another platform that provides comprehensive information about cryptocurrencies. Here the blocks of information are divided into the following sections:

  • blockchain analytics;

  • price prediction;

  • DeFi analytics;

  • market analytics;

  • NFT analytics.

The platform covers a fairly large layer of coins – more than 1,000. Here you can see both generally accepted indicators, for example, the concentration of holders by the amount of cryptocurrency in their accounts, and extravagant ones, for example, which show the activity of developers on Github.

For businesses in IntoTheBlock, as in Glassnode, the cost of services is determined on an individual request. For private investors, access to the functionality is free for the first seven days of use. However, for this you need to register. After the free period ends, the cost is $8.33 per month if you pay for the year, or $10 if you pay monthly.

CryptoQuant

CryptoQuant is a South Korean portal whose priority is collecting data on bitcoin, ether and stablecoins, and their analytics. There are quite a lot of indicator panels for traders and investors here. However, access to most of them will require at least registration on the portal.

Like other platforms, CryptoQuant has paid plans: Advanced, Professional and Premium. The monthly cost for them with an annual subscription ranges from $29 to $799. If the subscription is monthly, then Andvanced will cost $39, and Professional will cost $109. Premium is not available for monthly subscriptions. The only free option is Basic, but it only offers basic on-chain data.

Dune Analytics

Dune Analytics is a platform that is primarily focused on collecting data about the operation of the Ethereum network. However, here you can find dashboards for Bitcoin, Chainlink and even the MetaMask wallet.

Like other platforms, Dune Analytics is not completely free. There are three tariff plans: Free, Plus and Premium. Their main difference is how much information can be loaded in CSV tabular format. With the Free plan this feature is not available, with Plus you can export up to 250 CSV per month, and with Premium you can export up to 1,000 CSV per month. The cost also varies:

  • Free is free in all cases;

  • Plus will cost $399 or $349 per month (for monthly and annual subscriptions, respectively);

  • Premium costs $999 or $849 per month (for monthly and annual subscriptions, respectively).

Conclusion

On-chain analysis is a method of assessing information that is used only in the crypto industry. This is due to the fact that cryptocurrencies are a unique commodity, the heart of which is the blockchain. There are a huge number of on-chain indicators, but comprehensive on-chain analytics on almost all platforms is paid.

This material and the information contained herein do not constitute individual or other investment advice. The opinion of the editors may not coincide with the opinions of the author, analytical portals and experts.