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OnChain Data It provides users with a set of information obtained from the experience and analysis of the blockchain chain of each digital currency. In fact, the purpose of using that chain of data or the same data of that chain is to identify cryptocurrencies that are prone to growth. The data in the blockchain network obtained from such an analysis site allows you to check all transactions and financial transfers on a specific blockchain.
This is while this capability has not been observed in the traditional banking system and this issue has also created a platform for financial corruption. The indicators of that data chain On Chain will help you to identify the direction of the market trend before other traders to make transactions faster .
Unlike other financial markets, digital currency transaction data is publicly accessible, and through them, it is easy to identify projects that are worth investing in. In addition to providing different views about the trend of cryptocurrencies through fundamental analysis and technical analysis, the use of on-chain data also provides useful information in the analysis of the blockchain chain of each cryptocurrency. In the rest of this article, I will discuss the uses and benefits of that data chain.
Attention: Technical analysis without fundamental analysis will be an incomplete analysis. Therefore, it is suggested not to rely on the results of this analysis alone for investment.
What is On Chain Data?
On-chain data or on-chain data are data that include all the interactions of the blockchain chain and are stored in the network.
Enchain or chain data includes information such as all transactions performed on the public blockchain platform. For example, transaction details such as transferred currency, sending and receiving address, digital currency wallet address, transaction fee, transaction amount, etc., as well as smart contract code, mining fee, block data such as time are also information that It provides data to users. Based on the immutable, powerful and security mechanism of blockchain, those data chains cannot be changed, deleted or manipulated.
On-chain analysis and analysis training is such a research strategy using the information available in the public blockchain. Therefore, that chain of data makes it possible to predict price trends and support trading strategies for analysts.
Uses and benefits of such data
As you may have already realized, OnChain Analysis is a combination of fundamental and technical analysis that traders use to examine the trend of intra-network transactions.
Such analysts are trying to make a better prediction about the price movement of their desired cryptocurrency in the future based on that chain of data. In fact, you can make the best decision for buying and selling and investing in digital currency by identifying the best digital currencies prone to growth with the help of that data chain.
Read more: Learning to invest in digital currency
Other uses of OnChain Data It is possible to use it in daily transactions for investors and traders of the digital currency market. Although it was pointed out in the training of such analysis that this analysis is not suitable for short-term trading, it does not mean that it has no application in daily trading.
On the other hand, it is possible to check the amount of mined coins and the volume of transactions through such data. The use of that data chain has led traders and investors to advance in the market and it is possible to learn about the performance of whales in the market. Therefore, it is necessary for all investors with such data (on-Chain Data) have relative familiarity .
Limitations and disadvantages of on-chain data
In addition to all the advantages and uses mentioned in relation to that chain of data, there are also disadvantages in using it, which I will mention below:
- In the analysis of such Bitcoin, the available data is for about 10 years ago, and for some other cryptocurrencies, it is less than this value. Therefore, some such data are not very reliable and there is a possibility of changing their interpretation.
- Using that data chain and intra-chain analysis is not suitable for scalpers and short-term trading. The signals of these analyzes are used in the long term.
- Scalability layer 2 solutions such as sidechain and lightning make it possible to transform the volume of transactions. These items are measured in that data chain and are likely to change over time.
The components of that data chain
Those data chains are very dependent on the blockchain and its democratic system. This data includes 3 layers of centralized buyer and seller behavior, network health and network assessment.
Behavior of concentrated buyers and sellers
In the cryptocurrency market, there are exchanges, traders and big investors who do not have an impact on daily transactions, but the behavior of these people is very important in the market trend.
The second layer helps to analyze and evaluate the activity of these people by using indicators from that data chain. The information obtained in the first layer is also used in the second layer and provides a deeper insight into the plans of big investors..
Network health
In addition to the infrastructure role, the first layer also plays a role in determining the structure of the next layers. Other layers create their indicators based on the data of this section. Data in this phase is unmanipulated, edited and raw. The first layer includes monetary integrity (circulating balance), security (mining rate and hash rate), network transparency and applications (transaction volume and active addresses).
Value assessment
Miners in the cryptocurrency market do not sell large amounts of their assets when the price of Bitcoin is equal to or lower than its actual price. Based on that chain of data, this price gap can be understood.
That chain of data helps traders to guess the true value and detect negative or positive market bubbles. In the Bitcoin blockchain, using Enchain data, the amount of bubbles can be calculated every 10 minutes by analyzing the creation of new blocks..
Methods of using that data chain
That chain of data creates a deep view for the trader and is used for all businesses and people active in this field. Although these data alone cannot be responsible for all market events, they help to organize cryptocurrency transactions. In the following, I refer to the methods of working with that chain of data:
Total Value Locked (TVL)
Total Locked Value or TVL, is a measure in DeFi platform or decentralized applications to measure digital assets. All sizes If the TVL shows a higher number, the software or platform in question is more reliable, and from that point of view, the data chain will have a higher value . TVL actually includes the sum of stablecoins, tokens and other cryptocurrencies that are used as collateral in a platform for digital currency loans .
Also, this value provides the necessary liquidity for the platform and will increase its credibility. For example, if a DeFi platform has $5 million worth of Tether, $10 million worth of Ethereum, and other tokens ERC-20 is worth $2 million, its total locked value or TVL is $17 million .
Turnover
Trade Volume Another criterion involved in that is data chain. This measure actually specifies the total number of units of a currency that have been bought and sold in a certain period of time. Trading volume provides users with useful information about the liquidity and activity of a market or a platform.
If the transaction volume of an application and platform shows a higher number, it can be concluded that there is high liquidity in that platform. This criterion is used in technical analysis along with such analysis.
Supply distribution
Although the field of blockchain and digital currency is known for decentralization, there are some signs of concentration in it. For example, suppose you have a very large amount of the total supply of a particular cryptocurrency Active Address is limited.
In this case, it can be said that this currency has a disproportionate performance in terms of distribution, and whales will be able to change its price quickly. That Chinese data examined in this aspect of the market is called supply distribution (Supply Distribution) they are introduced. By examining this data, one can learn about the distribution method of a currency among active addresses in the market and adjust their investment strategy more accurately..
Information of developers and miners
Usually, the portfolio of ongoing cryptocurrency projects is available to the public. Tracking these addresses helps users to know if the team is collecting and uploading tokens or not. In projects like Bitcoin and Ethereum, miners are needed to maintain the network, and therefore their mentality is important. The buying and selling behavior of miners greatly affects the market.
Storage time
Evaluating the duration of holding a particular digital currency means that investors hold a currency for a long time and sell them at the same time.
In this situation, you can understand the mood of the market and the position of the investor. As the number of investors increases, you will see a decrease in the circulating supply of cryptocurrency. This analysis states that if the demand is constant, you will face an increase in the price of cryptocurrency.
Active addresses
Active Addresses In a particular platform or market, another important parameter in its analysis is data chain. In the cryptocurrency world, an address (sender or receiver) is considered active as soon as it is included in a successful transaction.
Therefore, booming financial markets have more active addresses. By reducing these addresses on a platform, that platform will likely experience a loss of users and stagnation.
The number of tokens transferred to the exchange
In that data chain, you will be able to see the tokens that are continuously sent to exchanges such as Coinbase and Binance. This means the correction of the price of digital currency, and based on this information, you can measure the financial risk of investing and the risk of keeping your digital currency..
Monitoring the behavior of market whales
Based on the analysis of that data chain, one can find out the number of whales and big investors. When a large percentage of an asset is held by small groups, these large-scale investors have the ability to manipulate the market. Therefore, the analysis of the main holders of cryptocurrencies is very important.
You can reach that chain of data through analytical sites with such facilities and tools and charts. Among these sites, we can mention the IntoTheBlock site , which is one of Farhad Exchange’s business partners.
