What is On-chain Data? Why analyze data on-chain?
What is On-chain Data? What is the meaning of On-chain data analysis? How to best analyze On-chain data? Find out here.
On-chain data is one of the important bases that accurately reflect what is happening on the Blockchain network. Therefore, in this article, I will introduce to you in general how On-chain data can help in investing in the field of Crypto as well as some tools that provide On-chain data. know.
What is On-chain Data?
On-chain data is data located on Blockchain, you can understand Blockchain as blockchains that are linked together and hold data. These data could be:
- Data about Blocks (time, gas fees, miners, …).
- Transaction data (participants wallet addresses, number of transfers, which tokens are transferred,…).
- Actions to interact with Smart Contract (add liquidity, participate in administration,…).
- Whenever you perform an action on the Blockchain, that action will be verified by the nodes, and will be updated to the overall Blockchain network.
At the same time, because Blockchains are a decentralized network, operating based on many Nodes, like Bitcoin has 11,558 nodes, Ethereum has more than 8,000 nodes, data is shared widely, so no one can manipulate it. , can modify this data source.
So On-chain data is the most honest and clear data.
Meaning of On-chain data analysis
Charts can be “DRAWED”.
News can be “BUY”.
But On-chain data cannot be Fake.
The above three sentences have confirmed the very important role of On-chain data, when analyzing On-chain data, you will receive the following benefits:
On-chain data does not lie, so it will provide us with the most accurate and objective information that is happening in the market.
Because Blockchain technology is built towards transparency in information, moreover this information is difficult to penetrate and change, so this can be considered the most reliable information source on the market. .
Monitor real-time market behavior
On-chain data also helps you to specifically track the behavior of objects in the market.
This is especially important when monitoring the activity of Whales, who possess a wealth of financial and informational resources to manipulate the markets.
Therefore, tracking whales On-chain and acting rationally can help you become the “winner few” in the market.
Help forecast and make investment decisions.
In addition, data analysis also helps you to forecast situations and make reasonable investment decisions.
Network activities often precede information on communication channels.
So when updating the On-chain information regularly, it also helps you to be able to anticipate situations so that you can be one step ahead of the community.
For example, in some cases where the price drops but the big wallets do not sell and continue to buy, it may be time to consider buying rather than selling in bulk.
For DeFi platforms, you can also rely on On-chain data about products to evaluate project performance and make decisions such as:
- If the product attracts a large trading volume as well as many users, it is likely that the project’s token will have a high potential for price appreciation.
- In addition, when the product’s On-chain data is good, it is also an opportunity for you to make a profit by interacting with the Dapps themselves.
Some notes when analyzing On-chain data
As such, On-chain data provides a lot of benefits, but there are still some points to keep in mind when performing On-chain data analysis as follows:
- Requires a lot of knowledge and experience: I consider this to be a fairly in-depth tool, so it requires users to have background knowledge as well as multi-dimensional perspectives to evaluate and forecast accurately from each other. information collected.
- Collating multiple sources of information: Currently on the Internet there are many tools that provide On-chain data, some of which are inaccurate. Therefore, you need to compare and contrast information from many sources to get the most accurate assessment.
- Note for data from the project’s website: Many times the numbers provided by the project are not completely accurate (due to many typical reasons such as marketing), so you also need to check that number. on the explorer of that Dapp’s underlying Blockchain.
- Regular updates: Since market behavior is constantly changing, information also needs to be updated regularly in order to act quickly.
On-chain data analysis case study
Below I will give some Case Studies on how the benefits of On-chain data analysis will help you in the investment process.
Data Analysis On-chain Sushi
For example, the first case study about AMM SushiSwap and the SUSHI token.
Some conclusions are pointed out after analyzing On-chain data:
- In terms of products, Sushi’s AMM is doing very well with revenue increasing 5 times in the context of strong market volatility.
- Sushi’s products are being developed Multi-chain to many other platforms such as Polygon or Fantom.
- The selling force of SUSHI Token is still very large with the token being pushed on the centralized exchange, Coinbase, increasing sharply.
So, after making the above conclusions, you can make the following decisions:
- While the market is so volatile, and the platform’s revenue increases sharply, it proves that Liquidity Providers will receive a lot of benefits, this is an opportunity for you to provide liquidity to receive a part of the revenue. this is growing rapidly.
- With such strong selling pressure, it is possible to think about restructuring capital for SUSHI and should not bottom out the token at that time.
On-chain data analysis ALICE
The next case study I will bring to you is On-chain analysis with ALICE token to forecast cash flow in advance.
Conclusions are made after analyzing On-chain data:
- The NFT land sale program has helped ALICE and Chromia attract more investors, as evidenced by the huge increase in the number of TVLs on the ALICE Staking Pools creating a huge Demand Side, especially in stable market conditions.
- However, the On-chain data also shows that the majority of ALICE’s trading volume is on Binance, which will cause great selling pressure on ALICE when the market is volatile.
- Top Holders increased their total ALICE Tokens by 34% compared to the previous month.
Based on the above data, you can make the following cash flow forecast:
- The land sale program has helped attract huge demand for the token, but that is likely only in the short term as most of the trading volume is still at Binance. And most likely there will be selling pressure when the program ends or the market corrects sharply.
- The Top Holders continue to accumulate but the total amount of accumulated tokens is quite small compared to the Circulating supply of about 17.4 million Tokens of ALICE.
- And the market conditions were quite bad at that time, so you can wait for a better entry to buy when in June it is likely that Trend NFT will come when CZ launches NFT Market Place.
On-chain data analysis KP3R
And the last Case Study I introduce to you is the decision to restructure capital for KP3R through On-chain analysis.
- The project at that time failed to attract new Developers to join the platform.
- The current Token Use Case and Model will hardly be able to cause the price to explode but only stay stable.
- KP3R tokens are being distributed quite large on exchanges, which is a bad sign that negatively affects the price when the market fluctuates strongly.
From there, you can completely make an action to restructure a part of the investment capital for KP3R. And as a result, although the market is quite good, the token price does not show any positive signs.
Tools to support On-chain data analysis
In this section, I will introduce you to some tools that will help you when performing On-chain analysis.
In addition, the idolmeta.net Insight team also has an On-chain Microscope series for in-depth analysis of what is happening on the network. You can completely refer to it to make your own investment decisions.
For Macro On-chain Analysis
These are tools that bring information about the whole market (or in terms of macro). On-chain data will mostly be about Bitcoin, Ethereum and large-cap DeFi tokens – coins that have a huge influence on the entire Crypto market. Or information about the amount of Stablecoins on the market.
Some of the Websites can be mentioned as:
- The Block: In the Data section, you can access a lot of data such as Spot, Future transaction volume, or the amount of Bitcoin, Ethereum going in and out of exchanges. As well as information about which Blockchain Stablecoin is on, …
- Crypto Quant: A very useful tool to use when analyzing BTC or ETH On-chain data. The website provides data ranging from basic BTC in and out of exchanges to in-depth On-chain metrics.
- Glassnode: Provides a lot of information related to On-chain BTC data.
- Whalebot Alert: Channel telegram alerting whale activities.
- And many other tools such as Whalemap Chart, Into the Block, etc.
Some ways to use the tools above I can suggest to you, such as:
- Use Crypto Quant to monitor BTC or ETH Inflow Outflows and keep an eye out for large trades to see how the whales are doing.
- The amount of BTC on the current exchanges is high or low, if it is high, it will create a large selling pressure that negatively affects the price.
- The tool informs how many Stablecoins are minted, if many Stablecoins are minted or on exchanges, it is likely that there is a huge amount of money to push the price up.
For On-chain micro analytics
These are On-chain analysis tools used when you need to observe data on a smaller scale (For example, when you need to analyze the On-chain data of that project or a token belonging to the same project). an ecosystem,…):
- Project Website: The data can be obtained from the project website itself. However, as I noted above, you need to check again on Explorer to re-validate the accuracy.
- Blockchain Explorer: This is the most accurate source of information. Some Explorers can be mentioned as Etherscan, Bscscan, Explorer Solana,…
- Token Terminal: A tool that provides a lot of On-chain indicators related to the project, also a reliable source when you authenticate Data from the project website.
- Nansen: The main tool that focuses on the On-chain data of Tokens on Ethereum.
- Dune Analytics: Provides a wide variety of On-chain information. However, this is a platform that includes many tools contributed by the community, so you also need to verify the information when using it.
And many more On-chain analytics tools? Please help me out in the comment section below.
On-chain data is a very powerful tool and an effective assistant for you in making your investment decisions.
However, this is a tool that requires users to have analytical knowledge and experience at a certain level to be able to use it effectively.
In addition, in the article, I also analyzed for you some On-chain analysis use cases to make projections as well as some On-chain analysis tools I often use.