On-chain analysis is the process of using blockchain data to evaluate the behavior and patterns of users, wallets, and assets within a blockchain network.

This data is publicly available on most blockchain networks, allowing crypto traders to study the flow of assets and the behavior of participants within the ecosystem.

By examining the transparent and public ledger of transactions, you can extract valuable insights that are not available through traditional financial analysis.

Common On-Chain Analysis Metrics

Several metrics are commonly used in on-chain analysis to assess various aspects of blockchain networks:

  • Transaction Volume: The total amount of assets transferred on the blockchain over a given period.
  • Active Addresses: The number of unique addresses that are active as either sender or receiver in a given timeframe.
  • Wallet Balances: Tracking the movement of large holders (also called “whales”) to understand market sentiment.
  • Token Flow: Monitoring inflows and outflows to and from exchanges to gauge potential selling or buying pressure.
  • Network Hash Rate (for proof-of-work chains): Indicates the overall security and mining activity on the network.
  • Exchange Inflows and Outflows: Tracking the movement of assets to and from exchanges can indicate potential buying or selling pressure.
  • Market Value to Realized Value (MVRV): A ratio comparing the market capitalization to the realized capitalization, used to assess whether an asset is overvalued or undervalued.

Examples of On-Chain Analysis

Spotting Whale Movements: You may notice a significant amount of bitcoin moving from a whale’s wallet to an exchange. This could indicate a potential large sell-off, which could impact price predictions.

Identifying Network Activity Surges: A spike in the number of active addresses or transactions might signal growing user adoption or upcoming network events.

Monitoring Crypto Exchange Balances: Observing a decrease in bitcoin balances held on exchanges can indicate users are moving assets to cold storage, which is often interpreted as a bullish signal.

Detecting Wash Trading: By analyzing transaction patterns, suspicious activity such as wash trading or market manipulation can be identified on decentralized exchanges.

On-chain analysis tools such as Glassnode, CryptoQuant, and Nansen have made it easier for both retail and institutional participants to gain deeper insights into market dynamics using publicly available blockchain data.