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The Importance Of On-chain Analysisby@gabrielmanga
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The Importance Of On-chain Analysis

by Gabriel MangalindanOctober 30th, 2022
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On-chain analysis is a process where someone (i.e., a crypto trader) looks at the on-chain data to help them make decisions. The data comprises information on every transaction on a particular public blockchain network. Users can use block explorers to review miner fees, smart contract code, and more. The information obtained from an on-chap study enables anyone to determine who owns what and their transaction activity. All of this information is recorded on the public ledger for anyone to see.

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On-chain analysis is a process where someone (i.e., a crypto trader) looks at the on-chain data to help them make decisions. On-chain data often comprises information on every transaction on a particular public blockchain network.

Information, including transactions, wallet addresses, transfer amounts, and more, are stored on the public ledger. So anyone can use a block explorer to find this information. Users can also use block explorers to review miner fees, smart contract code, and more.

The information obtained from an on-chain study enables anyone to determine who owns what and their transaction activity. For example, users can follow multiple transactions to trace their movements and determine where the payment originally came from. All of this information is recorded on the public ledger for anyone to see.

When it comes to trading, on-chain analysis is a method of financial research driven by fundamentals rather than technical indicators. Instead of looking for patterns on a chart, traders look at the recorded activity on the public ledger. On-chain analysis focuses only on a particular cryptocurrency asset by investigating its transaction activity and historical patterns, all of which may be used to anticipate the direction the cryptocurrency will go.

Trade data and investment activity may be retrieved from the blockchain network and evaluated to help investors create a viable trading strategy. For example, users can create models to help them make trading choices based on historical data. While history does not always repeat itself, it does rhyme, so being able to see how assets have behaved in the past is a good indicator for future strategies. Additionally, people may use the gathered financial data to create prediction models that can effectively forecast future price movements.

In addition to traditional research methods, including technical analysis (TA), on-chain analysis is progressively becoming more important for any investor serious about trading cryptocurrencies. Therefore, it is beneficial to approach the analysis of crypto assets from multiple angles instead of focusing on one approach.

A wide variety of online platforms and tools enable users to gather and analyze on-chain data. For example, block explorers like EtherScan (for Ethereum) and BscScan (for Binance Chain) provide basic amounts of information regarding transactions on those networks. However, for deeper information gathering, more sophisticated tools are needed.

CryptoQuant, a leading on-chain data platform, has become the official provider of on-chain data for CME Group’s Datamine. This on-demand platform allows traditional financial institutions to access detailed historical data.

Being the first and only on-chain data provider of CME Datamine in July 2022, CryptoQuant offers its data via CME Datamine, which enables traditional financial institutions and hedge funds to purchase the data from the CME Group platform. They can now get digital asset data from CryptoQuant via the CME Group Datamine service.

CryptoQuant data is recognized globally as the most reliable source of complex on-chain data for Bitcoin, such as exchange flows, miner flows, long-term holders, and many others. 

Used by many trusted media such as Forbes, Bloomberg, and CNBC, CryptoQuant has also worked with Valkyrie Fund to develop an overview of the Bitcoin market, contributing to Valkyrie’s Bitcoin Futures ETF approval in the US.

Previously, CryptoQuant developed a patented wallet verification technology that served anti-money-laundering services in 2019. CryptoQuant collaborated with the Korean National Police Agency in tracking and arresting the infamous criminals behind the Nth Room scandal. CryptoQuant has since grown exponentially, used by retail traders in over 200 countries and over 200 institutional clients.

“Digital asset investment was considered dangerous speculation compared to other assets such as stocks, gold, or properties. This bias has formed as there was no reliable information in this industry, and investors were purchasing digital assets without a data-based analysis,” said CryptoQuant CEO Ki Young Ju. “CryptoQuant’s main goal is to enable investors to redefine the way of digital asset investment, and to provide fundamental for digital asset valuation based on the data.”

As more traditional financial institutions expand to digital assets, the importance of reliable on-chain data, delivered through already familiar tools, will increase ever more. With the partnership with CME Group, CryptoQuant is expected to become the staple of the traditional financial industry and is actively recruiting new hires to meet the institutions’ demands. CryptoQuant is backed by Hashed, Galaxy Interactive and other major ecosystem investors.

Conclusion

If you decide to use blockchain-based assets like cryptocurrency for your financial dealings, that data will be stored permanently and cannot be altered. Everyone has access to some of the data stored in a blockchain, including the results of any on-chain analysis conducted on that data. However, it is worth noting that on-chain data can be useful for formulating future trading strategies.

Only the savviest traders and investors recognize the significance of the data recorded on the blockchain when determining how to best approach cryptocurrency transactions.