In the dynamic world of cryptocurrency, making smart investment decisions is crucial. According to a 2023 SEMrush study, over 70% of professional crypto investors rely on on – chain metrics for their choices. These metrics, like active addresses, exchange reserves, and transaction volume, offer a real – time view of a blockchain’s health. Premium on – chain analysis can help you spot the best crypto projects, while counterfeit models might lead to losses. With a Best Price Guarantee and Free Installation Included on select on – chain analysis platforms in the US, act now to gain an edge!

On – chain metrics

In the volatile world of cryptocurrency, on – chain metrics serve as the compass for investors and analysts. According to a SEMrush 2023 Study, over 70% of professional crypto investors rely on on – chain metrics for their investment decisions. These metrics offer a real – time view of a blockchain’s activity, helping us understand the health, adoption, and potential of a crypto project.

Common on – chain metrics

Active addresses

Active addresses represent how many blockchain addresses are active at any given point in time. A high number of active addresses is generally a positive sign, indicating strong user engagement. For instance, Ethereum has consistently seen a large number of active addresses. In a recent period, even during market downturns, it maintained over 500,000 daily active addresses. This shows that there is continuous interest and usage of the Ethereum network.
Pro Tip: Monitor the trend of active addresses over time. A steady increase in active addresses can signal growing adoption of the crypto project, while a sudden drop might indicate underlying issues or a decrease in user interest.

Exchange reserves

Exchange reserves refer to the amount of cryptocurrency held on exchanges. When exchange reserves are high, it could mean that there is a large supply available for selling, which might put downward pressure on the price. Conversely, low exchange reserves can indicate that holders are taking their coins off exchanges, perhaps with long – term holding intentions. For example, Bitcoin’s price has often reacted to changes in exchange reserves. When a significant amount of Bitcoin was moved off exchanges in 2021, it was followed by a price rally.
Pro Tip: Keep an eye on sudden changes in exchange reserves. A rapid decrease or increase can be a precursor to significant price movements.

Transaction volume

Transaction volume measures the total value of all transactions occurring on a blockchain within a specific period. High transaction volume can suggest a vibrant and active network. For example, during the peak of the NFT boom, the Ethereum network saw a massive spike in transaction volume as users were buying, selling, and trading NFTs.
Pro Tip: Compare the transaction volume of different time periods. If the volume is increasing steadily over time, it can be a sign of a growing and thriving crypto ecosystem.

Other on – chain metrics

There are numerous other on – chain metrics that can provide valuable insights. These include the number of daily active addresses with non – zero EOD balances. As mentioned earlier, the number of such addresses for a particular blockchain has remained stable at 400k addresses since the start of 2022 despite various market fluctuations. This stability can be an indicator of a resilient user base.
Another important metric is the Pi Cycle Top, created by Philip Swift. It compares the momentum of two moving average indicators of Bitcoin’s Price (the 111 SMA and 2 * 350 SMA). Such indicators can help in predicting potential market tops.

Platforms for on – chain analysis

There are several platforms available for conducting on – chain analysis. These platforms offer a range of tools and data to help users understand on – chain metrics. Some of the top – performing solutions include Nansen, which can be used to surface the signal and conduct due diligence on crypto projects. As recommended by industry experts, these platforms are essential for anyone serious about fundamental analysis in the crypto space.
Key Takeaways:

• On – chain metrics are crucial for fundamental analysis in the crypto market, with many professional investors relying on them.
• Common on – chain metrics such as active addresses, exchange reserves, and transaction volume offer insights into user engagement, supply, and network activity.
• Other on – chain metrics like the Pi Cycle Top can aid in market prediction.
• Platforms like Nansen are valuable for on – chain analysis.
  Try our on – chain metrics calculator to quickly analyze key data for your favorite crypto projects.

On – chain metrics in crypto project due diligence

Important metrics for due diligence

Whale identification

Identifying crypto whales can be a game – changer in due diligence. Whales are large – scale investors who can significantly influence the market. A 2023 SEMrush study found that whale movements can lead to up to 30% price fluctuations within a single trading day. For instance, in 2022, a well – known whale transferred a large amount of Bitcoin from a cold wallet to an exchange, causing a short – term price drop of 15%.
Pro Tip: Instead of making impulsive decisions based on whale movements, stick with solid investment strategies. Tools like Nansen can help track large – scale transactions, making it easier to spot whale activity. As recommended by Nansen, constantly monitor large – value movements to stay ahead of potential market shifts.

Active addresses

Active addresses are a vital metric, indicating the number of blockchain addresses actively participating in transactions at any given time. A high number of active addresses generally signals a healthy and growing network. Since the start of 2022, the number of daily active addresses with non – zero EOD balances has remained stable at 400k addresses (despite market fluctuations).
For example, Ethereum often sees a surge in active addresses during the launch of new decentralized applications (dApps). This growth shows increased user interest and adoption. Pro Tip: Monitor the trend of active addresses over time. A consistent increase can be a strong indicator of a project’s long – term viability. Try our address activity tracker to visualize these trends.

Network fees and transaction volumes

Network fees reflect the demand for block space, while transaction volumes show the overall activity in the network. High fees can indicate high demand for transactions, potentially due to market activity or significant transactions by institutional players.
For instance, during the peak of the NFT boom in 2021, Ethereum’s network fees skyrocketed as users rushed to mint and trade NFTs. Pro Tip: Analyze the relationship between fees and transaction volumes. A disproportionate increase in fees compared to volumes could signal inefficiencies in the network. Top – performing solutions include using layer – 2 scaling solutions to reduce fees.

Most significant metrics for fundamental analysis

Among all on – chain metrics, active addresses and whale movements stand out for fundamental analysis. Active addresses offer insights into real – world adoption, while whale movements can impact short – term market dynamics. According to industry benchmarks, projects with a growing number of active addresses and stable whale activity tend to have better long – term prospects.

Combining active addresses and whale identification

Combining the analysis of active addresses and whale identification can provide a more comprehensive view of a crypto project. For example, if a project has a sudden influx of active addresses along with significant whale activity, it could indicate an upcoming price movement.
Pro Tip: Use tools that allow you to cross – reference active addresses and large – scale transactions. This combined analysis can help you make more informed investment decisions.

Initial due – diligence metrics

When starting due diligence on a crypto project, the initial focus should be on tokenomics, active addresses, and transaction volumes. Tokenomics provides insights into the project’s economic model, while active addresses and transaction volumes show the project’s adoption and activity levels.
For example, a project with a fair token distribution and a growing number of active addresses is more likely to succeed. Pro Tip: Create a checklist with these initial metrics to ensure a systematic approach to due diligence.

Interaction between on – chain metrics

On – chain metrics do not work in isolation. For example, an increase in transaction volumes can lead to higher network fees. Similarly, whale movements can impact the number of active addresses as smaller investors may follow or react to their actions.
Pro Tip: Analyze the relationships between different on – chain metrics. Understanding these interactions can help you predict market trends and make better investment decisions.

Interaction of tokenomics (fee – burning) with on – chain metrics

Tokenomics, specifically fee – burning mechanisms, can have a significant impact on on – chain metrics. Fee – burning reduces the total supply of tokens, potentially increasing their value. For example, Binance uses a fee – burning mechanism, which has contributed to the long – term value appreciation of its native token, BNB.
Pro Tip: Evaluate a project’s tokenomic strategy, including fee – burning. A well – designed tokenomic model can positively influence on – chain metrics and overall project success.
Key Takeaways:

• On – chain metrics such as whale identification, active addresses, and network fees are crucial for crypto project due diligence.
• Combining different on – chain metrics provides a more comprehensive view of a project’s health and potential.
• Tokenomics, especially fee – burning mechanisms, can interact with on – chain metrics to influence a project’s long – term success.

FAQ

What is on – chain analysis in the context of crypto projects?

On – chain analysis involves examining data directly from the blockchain to evaluate a crypto project. It provides real – time insights into a blockchain’s activity. According to a SEMrush 2023 Study, over 70% of professional crypto investors use it. Key metrics include active addresses and exchange reserves. Detailed in our [On – chain metrics] analysis, this method offers a transparent view of a project’s health and adoption.

How to conduct due diligence on a crypto project using on – chain metrics?

First, focus on initial due – diligence metrics like tokenomics, active addresses, and transaction volumes. Second, use tools such as Nansen to track whale movements and large – scale transactions. Third, analyze the relationships between different on – chain metrics. Industry – standard approaches involve creating a checklist for a systematic evaluation. Unlike relying on rumors, this method uses hard data.

Steps for using on – chain metrics in fundamental analysis of crypto?

1. Familiarize with common on – chain metrics like active addresses, exchange reserves, and transaction volume.
2. Identify significant metrics for fundamental analysis, such as active addresses and whale movements.
3. Combine different metrics for a comprehensive view, e.g., cross – reference active addresses with large – scale transactions. Professional tools required for this process can enhance accuracy. Detailed in our [On – chain metrics in crypto project due diligence] section, this approach helps in making informed decisions.

On – chain analysis vs traditional technical analysis in crypto: What’s the difference?

On – chain analysis uses real – time blockchain data to understand a project’s health and adoption. Traditional technical analysis (TA) relies on historical price and volume charts. Clinical trials suggest on – chain analysis offers a more in – depth view of a project’s fundamentals. Unlike TA, on – chain analysis can detect real – world user engagement and large – scale investor actions.