In this blog, we will dive into our On-Chain Analytics tool, its features and how you can use it to your advantage when shaping your trading decisions. Let’s get right into it.
It’s best to start with an overview of what On-Chain Analysis is. Briefly put, it’s a research strategy that uses information found on the public blockchain to help you improve trading strategies. On-Chain Data usually includes information regarding all transactions that occur on a Public Blockchain network, such as active addresses, exchange flows, miner activity, transaction fees, and stablecoin data.
Our tool gathers all important on-chain data in one place. It includes:
- BTC: Exchange Reserves & Netflow + All Miners Outflow & Hashrate
- ETH: Exchange Reserves & Netflow
- Stablecoins: Exchange Reserves & Issued Supply
Now let’s look at each of these:
BTC-All Exchanges Reserve: The total amount of BTC held by all exchanges. An increase means an increase in BTC supply, which can be either sold or used as collateral for margin trading, while a decrease signals a decrease in BTC supply.
BTC-All Exchanges Netflow: The change in the supply of BTC on all exchanges. A positive number means that inflow was greater than outflow, and a negative number means that outflow was greater than inflow.
BTC-All Miners Outflow: The total amount of BTC that was transferred from the wallets of miners. A lot of outflow can indicate increased selling pressure, while lots of inflow points to lots of buying pressure.
BTC-Hashrate: The average number of hashes per second across all BTC miners, expressed in GH/s. A higher hashrate means that more computing power is dedicated to mining BTC, making the network safer and indicating increasing interest in mining.
ETH-All Exchanges Reserve: The total amount of ETH held by all exchanges. An increase means an increase in ETH supply, which can be either sold or used as collateral for margin trading, while a decrease signals a decrease in ETH supply.
ETH-All Exchanges Netflow: The change in the supply of ETH on all exchanges. A positive number means that inflow was greater than outflow, and a negative number means that outflow was greater than inflow.
All Exchanges Reserve of all Stablecoins: The total amount of Stablecoins held by all exchanges.
Issued Supply of all Stablecoins: The aggregated issued supply of all major stablecoins.
To sum it up, on-chain analysis gives a crypto trader an opportunity to gain an upper hand in the market with the help of real-time insights of a blockchain network. All of the data provided can be actionable, but the easiest data to interpret - and probably the most important in terms of relatively short-term price movements - are exchange netflows. Simply put, outflows of BTC or ETH mean that market participants are moving their coins off of exchanges, and this often means that these coins are going into long-term cold storage, reducing sell pressure. On the other hand, inflows of coins onto exchanges can signal sell pressure, but this is a bit more complex than in the case of outflows, since BTC and ETH can also be used as collateral for margin trading, which isn’t necessarily bearish. Still, a good rule of thumb is that inflows during times of instability - for example after BTC or ETH break bullish market structure - are more likely to signal the intent to sell than in other cases.
While these tools are very important, we definitely recommend everyone to use them in combination with Technical and Fundamental analysis, to really be able capitalize on the advantages offered by a more data-abundant and transparent crypto market. Try our On-Chain Analytics Tool here!