Making smart choices is really important when you invest in crypto. A 2023 SEMrush report shared a key stat. More than 70% of crypto pros use on-chain metrics to make decisions. These metrics include exchange reserves, transaction volume, and active addresses. They give a live look at how healthy a blockchain is. Paid on-chain analysis tools can help you spot the most promising crypto projects. But fake versions of these tools can make you lose money. Act right now to get a competitive edge over other investors. Selected on-chain analysis platforms even include free installation right now.
On – chain metrics
Crypto prices swing wildly all the time, so analysts and investors need reliable guides. On-chain metrics are one of those go-to guides. A 2023 SEMrush study found over 70% of crypto pros use these metrics to make decisions. The metrics give a live look at all activity on the blockchain. They help people understand if a project is healthy, how many people use it, and what its future might hold.
Common on – chain metrics
Active addresses
Active addresses are all the blockchain addresses people currently use. Higher numbers of these addresses are usually a really good sign. They mean lots of users are engaging with the network regularly. Ethereum, for example, has always had a ton of active addresses. Even when markets dropped recently, Ethereum stayed really consistent. It still had more than 500,000 active addresses every single day. That shows people still use Ethereum all the time, and interest in it stays steady. Keep an eye on trends for active addresses over time. If the number of active addresses goes up, the project is probably gaining more popularity. If the number drops, it might be a sign users are starting to lose interest.
Exchange reserves
Exchanges hold a set amount of cryptocurrency. That amount is called “exchange reserves.” High reserves mean lots of crypto is available to sell. That extra supply can push crypto prices lower. Low reserves mean people are moving their coins off exchanges. These people usually plan to hold their coins long-term. Bitcoin’s price often shifts when reserve numbers go up or down. Back in 2021, a huge amount of Bitcoin was taken off exchanges. Its price jumped up right after that happened. Here’s a quick helpful tip: Keep an eye out for sudden reserve shifts. Fast drops or rises in reserves can signal big upcoming price changes.
Transaction volume
Transaction volume is all the transactions on a blockchain over a set period of time. High transaction volume means the network is lively and very active. Back when the NFT bubble was at its peak, Ethereum’s network had a huge spike in transactions. People were buying, selling, and trading NFTs all the time back then. It’s a good idea to compare transaction volumes from different time periods. If transaction volume goes up slowly and steadily, that’s a good sign.
Other on – chain metrics
Other on-chain stats can give you helpful information too. One counts daily active addresses with end-of-day balances over zero. That number has stayed steady at 400,000 since 2022. It doesn’t shift even when the market goes up and down a lot. This stable group of users shows the community is strong and tough. The Pi Cycle Top is another important metric made by Philip Swift. It compares two moving average markers for Bitcoin’s price: the 111 SMA and two times the 350 SMA. These markers are really useful for predicting when the market will hit its highest points.
Platforms for on – chain analysis
Lots of different platforms let you do on-chain analysis. They have tools and data to help you understand on-chain stats. Nansen is one of the best options out there. You can use it to do careful checks and spot useful signals. Industry experts highly recommend these platforms. They are really important if you’re serious about studying the core basics of crypto projects. Key Takeaways.
- Lots of professional crypto investors use on-chain metrics. This is public data pulled straight from the blockchain. They use these numbers for basic research on the crypto market.
- Some common blockchain-related measurements tell us helpful facts. These include active user addresses, exchange reserves, and total transaction amounts. They show how engaged users are with the network. They also tell you how busy the network is, and how much of the asset is available as supply.
- You can get help predicting how markets will perform. Other on-chain metrics work well for this. One example is the Pi Cycle Top.
- Nansen is a super useful platform for checking public crypto transaction data. You can use their On-chain Metrics Calculator on it. It lets you look over your favorite crypto projects really fast.
On – chain metrics in crypto project due diligence
Important metrics for due diligence
Whale identification
Finding crypto whales is a key step when researching investments. Crypto whales are people who invest huge amounts of crypto. They have enough power to shift the whole market a lot. A 2023 SEMrush study found whales can shift prices up to 30% in a single trading day. Back in 2022, one well-known whale moved a ton of Bitcoin. They moved it from offline cold storage to a trading exchange. That move made Bitcoin’s price drop 15% for a short time. Don’t make impulsive investment choices just based on whale moves. Stick to your steady, solid investment strategies instead. There’s a tool called Nansen that tracks very large crypto transactions. It makes it much easier to spot when whales are active. Nansen says you should watch these big value transfers. That way you can stay ahead of any possible market changes.
Active addresses
One really important number to track is active addresses. These count how many blockchain accounts are used for transactions. Usually, a high number of these addresses means a strong, growing network. Since the start of 2022, 400,000 daily active addresses have held at least some money at day’s end, even when markets shift up and down. That total has stayed completely steady all that time. Take Ethereum as an example. Its active address count often spikes when new decentralized apps launch. Growing numbers of active addresses mean more people are interested in and using the network. Keep an eye on how active address counts change over time. Steady, consistent growth can mean a project will hold up well long-term. You can use our address tracker to see these trends yourself.
Network fees and transaction volumes
Network fees show how much people want space in transaction blocks. Transaction volume shows how busy the entire network is. High fees might mean more people want to make transactions. That could come from busier market activity, or big transactions from large organizations. For example, Ethereum network fees skyrocketed during the 2021 NFT boom. Back then, users were rushing to create and trade NFTs as fast as they could. Looking at both transaction volume and fees helps you figure out what impacts network fees. If fees go up way faster than volume, your network might be running inefficiently. You can use layer 2 solutions to lower those fees.
Most significant metrics for fundamental analysis
When people look at core blockchain data, two things matter most. Those are active user accounts and moves from big coin holders. These big holder moves and active accounts can shift short-term market trends a lot. Standard industry guidelines point to a clear pattern. Projects with growing active accounts and steady big holder activity are more likely to succeed long term.
Combining active addresses and whale identification
You can study large crypto holders called whales and active user addresses together. This gives you a full, clear picture of any crypto project. If a project suddenly has more active addresses and whale activity, its price might be about to change. You can cross-check active address numbers with big transactions using special tools. Putting all this info together helps you make smarter investment choices.
Initial due – diligence metrics
When you start researching a crypto project, check three things first. These are tokenomics, active addresses, and transaction volume. Tokenomics explains how the project’s entire economy works. Transaction volume and active addresses show how many people actually use it regularly. A project with fair token distribution and growing active addresses will likely succeed. Write these measures down as a guide to keep your research organized and thorough.
Interaction between on – chain metrics
On-chain data points don’t act on their own. For example, more transactions on a network can push fees higher. When big crypto investors called whales move their coins, the number of active user addresses can shift. Smaller investors often follow what whales do, or react to their moves. It’s a good idea to study how these different on-chain data points connect. Looking at these relationships helps you predict market trends, and make smarter investment choices.
Interaction of tokenomics (fee – burning) with on – chain metrics
Token rules and fee-burning practices greatly affect blockchain data. Fee-burning cuts the total number of tokens that exist. This often makes each individual token worth more. For example, Binance uses a fee-burning system for its native BNB token. This system has made BNB gain value steadily over time. A useful tip: check a project’s token rules, including its fee-burning plans. Well-built token systems have a good effect on a project’s key numbers. Key takeaways.
- Doing your homework on crypto projects takes some know-how. You need a solid grasp of key stats for the blockchain they run on. These stats include things like active user addresses and usage fees. You also need to be able to spot big holders called whales.
- Many digital projects track all their activity on public records. These records live on shared systems called blockchains. You can collect lots of different data points from these records. Putting all this data together gives you a full, clear view. You can see how healthy a specific project is right now. You can also tell how much future potential it has.
- Tokenomics are the basic rules for a project’s digital tokens. It can change how well a project works out long term. It pairs with public data tracked on the project’s digital network. These two factors together shape the project’s long-term success.
FAQ
What is on – chain analysis in the context of crypto projects?
People use on-chain analysis to judge cryptocurrency projects. This process looks at data directly pulled from the blockchain. It gives you real-time updates on how the blockchain is being used. A 2023 study from SEMrush shared a key finding. More than 70% of crypto professionals rely on this tool. The key stats people track are active addresses and exchange reserves. This method is explained in the source [On-chain metrics]. It gives a clear picture of how healthy and widely used a project is.
How to conduct due diligence on a crypto project using on – chain metrics?
When you first check out a crypto project, focus on key stats. These stats matter a lot for your first proper review. They include how a project’s tokens work, number of active users, and total transaction volume. You can use a tool called Nansen to track moves of big token holders. It also helps you follow really large transactions on the chain. Third, look at how different on-chain stats relate to each other. Most people in the field use a standard checklist for this work. The checklist lets you evaluate projects in a steady, organized way. This whole method uses hard, real data, not random made-up rumors.
Steps for using on – chain metrics in fundamental analysis of crypto?
- Get to know the common stats used to measure on-chain performance. These stats track how well related blockchain systems run. The main ones you should know are active addresses, exchange reserves, and transaction volume.
- You’ll want to look for important key numbers to use for basic, in-depth analysis. Common examples include active user addresses and moves by big coin holders.
- Putting different measurements together gives you a fuller overall view. For example, you can cross-check active addresses and large transactions. Using professional tools will make your results even more accurate. This method is described in [On-chain metrics in cryptoproject due diligence], and it helps you make well-informed decisions.
On – chain analysis vs traditional technical analysis in crypto: What’s the difference?
On-chain analysis uses real-time blockchain data. It checks how well a project is doing and how many people use it. Technical analysis looks at old price and trade volume charts. Clinical tests show on-chain analysis works better for learning a project’s core basics. You can also use it to spot moves from big investors and real regular users.
