Recently, the number of people interested in on-chain analytics has increased. Among the uses of this statistical science, which is not related to technical analysis, we can mention the prediction and guess about the future of the digital currency market. Although this is not an easy task, anything can happen, but with the help of new science and statistical data, you can make predictions with a minimum margin of error, because the more accurate the predictions and forecasts, the greater the probability of profit.
Onchain analysis, or in other words on-chain analysis, is a new science that examines and analyzes the criteria and parameters that affect the price and value of digital currencies. Using on-chain analysis is very useful for traders who want to define their trading strategies.
On-Chain analysis
The on-chain analysis is a new science that can be used to analyze and examine the beneficial fundamentals and transactions of digital currencies and blockchain networks. Analysts using this statistical science want to better and more accurately estimate and predict the value and price movement of digital currencies. Typically, in on-chain analysis, things like transaction volumes, mining details like block rewards, price and value dependencies, funds on and off exchanges, etc. are looked at and analyzed.
The only difference between on-chain analysis and basic analysis is that in on-chain analysis, the data and information contained in the blockchain are used to determine the value of the network; But in fundamental analysis, the true value of a project or company is determined. It can be said that one of the most fundamental uses of on-chain data is the use of data related to transactions and volts to determine the value of the network.
In other words, it prevents entry and investment in cryptocurrencies or projects with hype. To benefit from analysis of the blockchain network, information about the blockchain is needed, and due to its popularity, Bitcoin has more useful information on the blockchain network.
The importance of on-chain analysis
As you know, today the wealth is in the hands of a few, the economy is not balanced, and the transactions of governments and important persons cannot be analyzed or reviewed; But in the analysis of this chain (on-chain), this still exists and can reduce most of the financial corruption. Technical analysis only looks at value and price; On-chain analysis is a new science that examines and analyzes the factors that influence the price and value of a digital currency. Taking advantage of on-chain analysis is beneficial for traders who want to make profitable transactions.
Advantages of on-chain analysis
Onchain analysis of digital currencies is a new study and analysis aimed at increasing and improving the user’s understanding of various analyzes and criteria, predicting and better guessing with a minimum percentage of errors about the price and changes of digital currencies in the future. It can be said that it provides a more comprehensive and better analysis than technical analysis. In other words, in the online analysis of the digital currency, in addition to checking the inflow and outflow of capital from the exchange, information about rewards, and even transactions, an attempt is made to use the data and information in the blockchain as a basic analysis. It can be said that using on-chain analysis of the digital currency, you can predict the short-term entry and exit points for the selected digital currency. If we want to list some of the advantages of on-chain data in general, we can mention the following items that we have listed for you, dear friends:
- Access to information and facts about users and networks
- Possibilities to combine different features to get accurate results
- Various data and tools can be accessed for free
- Allocation of holders’ assets in beneficial digital currencies
- Be able to estimate the behavior of the project in the long term
- No special knowledge is required
Introduction of On chain Data provider websites
In this section, we will introduce some websites of on-chain service providers:
1. In to the block
This website offers a wide range of features and analytics tools, such as on-chain analytics for multiple cryptocurrencies, order list data, and sentimental analysis.
2. Sentiment/Sanbase
The Sentiment is another website that provides chain data and on-chain analysis data that you can use to access certain information from this website.
3. CQ.live
The CQ.live website is something every trader should know and use. This website is one of the important tools to check exchange money flow, miners’ activity, etc.
4. Coinmetrics
This website provides free on-chain information services for 37 crypto assets and is one of the leaders in on-chain information.
5. Look into bitcoin
The site is a free resource for Bitcoin research, modeling the Bitcoin market cycle and chain parameters.
6. Glass node
On this website, some basic features related to on-chain information are provided free of charge to users, but to access more advanced features, you need to pay a fee.
How does the On Chain Analysis indicator help traders?
The main advantage of the analysis index in China is to investigate investor behavior and monitor market trends. The two main indicators most focused on in On-chain analysis are the “number of active wallet addresses” and “number of cryptocurrency transactions”. An increase in these two indicators is usually accompanied by an increase in prices. The arrangement and distance between these two indicators convey different messages. For example, a deviation from these parameters indicates a bull market.
On the other hand, checking UTXO can also help predict Bitcoin prices. With the help of this indicator, it is possible to understand the number of cryptocurrencies available on exchanges or stored (held) in wallets and to predict the increase or decrease of transactions and prices.
Final speech
Analyzing on-chain data is a new market analysis method that was first mentioned in 2011, But its use gained more importance in 2017. There are many stories about using this analysis to analyze market price futures, each with its critics and fans; But in any case, this is a new and very comprehensive method of market analysis; So maybe it can be used as technical analysis in the future.
