How does Crypto On-Chain Analysis work?

On-chain metrics turn blockchain-based transaction data into useful insights into the crypto market.

The vast majority of cryptocurrencies available on the market today utilize public Blockchains to verify and record data. This means that the data “on-chain” can be viewed by anyone at any time and from anywhere in the world. On-chain analysis guides the strategy of using information from a blockchain ledger to determine market sentiment. More specifically, it’s about looking at transaction data and crypto wallet balances, two things that are useful when trying to decide whether to make an investment or not, in short, when nobody is trading a token and the predominant Majority of its circulating supply is controlled by a handful of large forks known as whales, so investing is probably not a good idea.

On-chain tools you can use
You can use blockchain scanners like EtherScan for Ethereum and SnowTrace for Avalanche to search for smart contracts or wallet addresses. But they don’t collect data or proposal tools to make sense of the wealth of data points that exist.

In response, countless platforms and sources have sprung up offering detailed charts and dashboards to help users better visualize blockchain data and track individual cryptocurrency and wallet movements. Many of these on-chain analytics platforms are free, or at least offer a lot of features. Some of the most popular are:

Glassnode
Into The Block
Nansen
Dune Analytics
Messari
But the on-chain analysis doesn’t tell you what to do. It’s up to you to devise a technique based on available information. Here is some guidance on how to make the most out of the Blockchain data dump.

Bitcoin movements
Bitcoin (BTC) is the world’s first viable cryptocurrency and the biggest by market cap. Because of this, price movements can often cause a ripple effect on the rest of the market; This means that when the price of Bitcoin goes up, other crypto-assets go up, and vice versa. As such, many investors often keep a close eye on Bitcoin’s on-chain activity. Glassnode provides highly granular metrics for on-chain Bitcoin data such as Bitcoin whale movements.

Smart contracts and the flow of smart money
In the ancient world of finance, “smart money” refers to any capital controlled by skilled investors, institutions, and funds. The term has also entered the Defi lexicon, where it refers to institutions such as crypto venture capital funds or whales (those holding amounts of crypto). Nansen is a popular source for tracking where the smart money is going in and out.

NFT insights
The recent hot NFT trend has also spawned a variety of on-chain analysis tools specifically focused on the NFT market.
CryptoSlam provides NFT sales volume while Icy. Tools allow you to view real-time sales data. Since the price of items in an NFT collection is often determined by their rarity, traders use tools like Rarity.
Tools and LuckyTrader to understand where the rarity of an individual item in a collection lies based on on-chain data.
BlockProbe is an example of a platform with a deal spotter feature that lets users know when a specific NFT is selling at a bargain price based on data from a collection.