In our previous article on types of cryptocurrency market analysis, we made mention of Fundamental, Sentimental, Technical and On-chain analysis, and how crypto traders employ these analysis to make trading decisions. 

‍

Now, we are going to look at the top three tools that would aid your on-chain analysis practices, but first…

‍

What is On-chain Analysis

‍

On-chain analysis is the process of determining market sentiment by using data from a blockchain ledger.  It entails reviewing transaction data and crypto wallet balances before opting to make an investment.

‍

‍What an exciting time to be a trader!

‍

The on-chain analysis market is the first of its kind in the cryptocurrency space. Traders are using this emerging technology to better predict market movements and gauge overall sentiment. 

‍

Furthermore, traders and investors leverage on on-chain analysis to determine why and when other market participants (like Miners, Institutional Investors, exchanges, hedge funds and others) are buying or selling. 

‍

Insightful on-chain indicators‍

‍

‍

• Number of active addresses: This is the total number of active wallet addresses.
  ‍
• Number of transactions: This is the total number of transactions.
  ‍
• On-chain volume: This is referred to as the number of valid transactions that are recorded in the blockchain.
  ‍
• Hash rate: This is the measure of computation power used by proof of work cryptocurrency networks to process transactions in the blockchain.
  ‍
• Miner revenue: Miners are paid rewards for processing transactions in a blockchain’s native currency. Miners revenue takes into account the transaction fees and the inflation reward. 
  ‍
• Total value locked (TVL): The total value locked as the name implies is the  total amount of user funds deposited in a DeFi protocol.
  ‍
• Market value to realized value (MVRV): This is the ratio of an asset’s marketcap vs its realized cap.
  ‍
• Network value to transaction (NVT): This is the relationship between the transfer volume and market cap of an asset
  ‍
• Realized cap: Since cryptocurrency can be lost, realized cap is the value  of the UTXO ( unspent transaction output) as at the last price it moved.  

Top 3 On-chain analysis tools

‍

1. Glassnode

‍

‍

Glassnode is an on-chain analysis tool that was founded in 2017 by Rafael Schultze-Kraft with its headquarter in Zurich, Switzerland. Its purpose is to help traders and investors with advanced insight, market intelligence, tools and data which are generated on blockchain. Glassnode provides the required data, knowledge, and confidence to make better investment and trading decisions in Bitcoin, Ethereum and other cryptocurrency markets.

‍

2. Santiment 

‍

‍

Santiment provides investors and traders with watchlists, alerts, chart layouts, screeners, insights and other tools that help them research the crypto market to make their next financial decisions. Santiment was launched in 2016, founded by Maksim Balashevich, and since it was launched it has been useful for retail investors, crypto project owners, and NFT creators. 

‍

3.  CryptoQuant

‍

 ‍

CryptoQuant aims to help crypto traders and investors with data based decisions by offering comprehensive data for crypto trading which includes, on-chain data, short/long term indicators for Bitcoin, Ethereum, Stablecoins, and ERC20 tokens. CryptoQuant was founded by David Ross, and since its launch it has empowered its users to value cryptocurrencies and uncover actionable signals. 

‍

Conclusion

‍

On-chain data makes it possible for crypto traders and investors to take notice of activities that occur in the entire blockchain ecosystem for correct valuation of the network. These data from blockchain networks can be compared to traditional valuation frameworks such as financial statements in stock markets and network valuation methods (e.g. Facebook's social network).

‍