What is onchain analysis and how to use it as a crypto trader?

• Onchain analysis is the examination of blockchain data to understand transaction patterns, asset movements, and network health.

• It provides unique insights into market movements, absent in traditional finance, providing participants with a different approach to research and due diligence.

• Onchain analysis can be a new framework for crypto valuation which allows users to establish an edge.

Onchain analysis looks at public blockchain information, like transactions and how much crypto is in a wallet. It helps you understand what people are doing on the blockchain right now. This unique insight into market movements, absent in traditional finance, gives people a different way to do research and make educated decisions.

Public blockchains such as Ethereum, Solana, and Bitcoin are transparent digital ledgers, auditable by anyone and everyone. Every transaction and event on these chains is visible and publicly accessible, allowing anyone, anywhere, at any time, to access and analyze it.

This transparency creates a new way of thinking about trading. It enables real-time monitoring of transactions, providing a deep understanding of market activities. Consequently, users who effectively utilize onchain analytics can make more informed decisions and identify opportunities early.

On-chain data refers to transactions that have been verified and are recorded on a blockchain. On-chain data is openly accessible through block explorers, and users can use this information to determine potential price movements. On-chain analysis uses the data to predict trends and gauge market sentiment – it involves monitoring how funds move on the blockchain to detect potential transaction opportunities.

On-chain analysis uses many different measurements, like how many wallets are active, the total amount of transactions, where the supply of an asset is, and the total value of assets locked in a smart contract. These measurements are used to understand how an asset's price might change. Realized profits and losses, supply in profit or loss, and realized capitalization are the primary on-chain indicators for market action.

Various tools are available for onchain analysis. These tools allow users to look up any wallet address or smart contract. But they don’t aggregate data or offer tools to make sense of the wealth of data points that exist.

In response, numerous platforms and sources have sprung up that each offer insightful charts and dashboards to better help users visualize blockchain data and track the movements of crypto and individual wallets.

On-chain analysis is the examination of blockchain data to understand transaction patterns, asset movements, and network health, helping people make better decisions in the world of cryptocurrency.

By measuring data points like token holder counts, transaction volume and decentralization metrics, users can gain a better understanding of the fundamental value of a cryptocurrency.