On-chain data is data located on Blockchain, investors can understand Blockchain are blockchains that are linked together and hold data. These data could be:
- Data about Blocks (time, gas fees, miners, …).
- Data about transactions (e.g. wallet addresses of participants, amount of transfers, which tokens are transferred, etc.).
- Actions to interact with Smart Contract (add liquidity, participate in administration, …).
- Whenever an investor performs 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
Chart can be “DRAW”.
News can be “BUY”.
But On-chain data cannot be Fake.
The above three sentences have affirmed 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 investors to track specifically 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 investors become the “winners” in the market.
Help forecast and make investment decisions
In addition, data analysis can also predict 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 investors have the ability to anticipate situations so that they can be one step ahead of the community.
Eg: 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, it is also possible to rely on On-chain data about products to evaluate project performance and make decisions such as:
- If the product attracts a large transaction 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 On-chain data of the product is good, there is also an opportunity to 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: This is 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 the collected information.
- Compare multiple sources of information: Currently on the Internet there are many tools that provide On-chain data, there will be tools that are not accurate. Therefore, investors need to compare and contrast information from many sources to get the most accurate assessment.
- Note for the data from the Project Website: Many times, the numbers provided by the project are not completely accurate (due to many typical reasons such as marketing), so investors also need to check that number on the explorer of that Dapp’s Blockchain platform.
- Updated frequently: 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 the benefits of On-chain data analysis that will help people in the investment process:
Data Analysis On-chain Sushi
Example of a first case study about AMM SushiSwap and SUSHI token, analysis was done on May 26th.
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 completely make the following decisions:
- While the market is so volatile, and the platform’s revenue increases sharply, proving that Liquidity Providers will receive a lot of benefits, this is an opportunity for investors to provide liquidity to receive a portion of the business. revenue is growing strongly.
- 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 investors is On-chain analysis with ALICE token, the analysis was done on May 10 to forecast cash flow.
Conclusions are made after analyzing On-chain data:
- Land sale program NFT 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, investors 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 on Binance. And most likely there will be selling pressure when the program ends or the market corrects sharply.
- 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 it is possible to 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 is the decision to restructure capital for KP3R through On-chain analysis.
The article was made on April 18, some conclusions are made as follows:
- 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, investors can completely 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
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, investors can access a lot of data such as Spot, Future trading volume, or the amount of Bitcoin, Ethereum going in and out of exchanges. As well as information about which stablecoins are on which Blockchain, …
- Crypto Quant: Very useful tool to use when analyzing BTC or ETH On-chain data. The website provides data from basic like BTC going in and out of an exchange to in-depth On-chain metrics.
- Glassnodes: Provides quite a bit of information related to BTC On-chain data.
- Whalebot Alerts: Channel telegram warns of whale activities.
- And many other tools such as Whalemap Chart, Into the Block…
Some ways to use the above tools are:
- 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 Mined, 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 that are used when investors need to observe data on a smaller scale (For example, when needing to analyze the On-chain data of that project or a token belonging to a particular project). Ecosystem,…):
- Project Website: The data can be obtained from the project website itself. However, as I noted above, it is necessary 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 validating Data from the Project Website.
- Nansen: The main tool that focuses on the On-chain data of Tokens on Ethereum.
- Dune Analytic: Provides a variety of On-chain information. However, this is a platform that includes many tools contributed by the community, so it is also necessary to verify the information when using it.
And there are many other On-chain analysis tools.
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