Onchain analysis of cryptocurrencies: how to use it

2025-05-20 20:52:01

On-chain analysis (on-chain analysis) is a methodology for studying the crypto market based on the open data of the blockchain itself. Since every transaction is recorded on the blockchain and cannot be altered, any user can view the network and find out where funds are moving and how assets are distributed among wallets. This transparency turns the blockchain into a vast database of fundamental data that helps identify demand, assess risks, and even forecast price changes. In this, participants in the market are assisted by on-chain analysis.

Table of Contents* Principles of On-Chain Analysis

Key metrics and what they show
How to apply metrics in practice
Limitations and pitfalls
Tools and platforms for on-chain analysis
Examples of on-chain analysis work
Conclusion

Principles of on-chain analysis

Data Openness. Blockchain is a distributed ledger, a record that is stored on thousands of nodes (network nodes). The data is not hidden behind banking secrecy or corporate servers: it can be accessed through a public explorer or API.
Immutability of records. Once a block is confirmed, it cannot be altered. This means that the statistics are not subject to retouching, and transaction falsification is excluded at a technical level.
Chronology and Completeness. In the blockchain, the history of any coin can be traced from the moment of creation to the current block. This provides the researcher with the entire lifecycle of the asset without gaps.

Key metrics and what they show

Metric	What it measures	What it signals	Practical conclusion
Active Addresses	The number of unique wallets that have made at least one transaction during the period	Growth reflects user influx and demand for the network	Confirms organic interest in the project
Transaction Volume	Total value of transfers over a day, week, month	High volume indicates real economic use of the network	Helps distinguish speculative price growth from fundamental
Hashrate	The total computational power of the Proof-of-Work network	A growing hashrate makes the network more reliable and confirms miners’ interest	A decline may herald technical risks and a decrease in trust
Exchange Wallet Balance	The amount of coins in the hot and cold wallets of centralized exchanges	Inflow of coins to the exchange - potential supply for sale; outflow - accumulation	Useful for assessing short-term price pressure
TVL (Total Value Locked)	The value of assets locked in DeFi smart contracts	User trust and engagement in the ecosystem	Comparing the TVL of different networks shows where liquidity is concentrated
NVT (Network Value to Transactions)	Market capitalization / daily transaction volume	High values often coincide with overbought phases	Fundamental overvaluation metric, similar to P/E
MVRV (Market Value to Realized Value)	Market capitalization / coin value at the last movement price	Values < 1 indicate oversold conditions, > 3 indicate overheating	Helps to catch the bottom and top of the cycle
HODL Waves	Distribution of UTXO ( unspent transaction output ) by coin age	The share of “old” coins increases during accumulation, decreases during distribution	Useful for assessing long-term investor confidence

How to apply metrics in practice

Trend Confirmation. The rise in Bitcoin’s price, accompanied by an increase in active addresses and volumes, confirms a healthy bull market. If the price rises while activity declines, there is a high likelihood of a correction.

Statistics of active bitcoin addresses. Source: CryptoQuant Early detection of large player sales. Large BTC transfers to the exchange serve as a warning of potential sell-offs — one can reduce leverage or lock in part of the profit.

Asset inflow chart on cryptocurrency exchanges. Source: CryptoQuant Market phase definition by MVRV. Historically, MVRV below one coincided with miner capitulation in December 2018 and June 2022. Buying during such periods statistically provided better long-term returns.

Bitcoin MVRV. Source: CryptoQuant Comparison of ecosystems by TVL. In 2023, the growth of TVL for Arbitrum and Optimism outpaced the growth of their native tokens: liquidity moved into the networks before it reflected on the price. Analysts who tracked TVL were able to enter positions before the pump.

TVL statistics of networks. Source: DeFi Lama( Limitations and pitfalls

Off-chain transactions. Transfers within the exchange, on the Lightning Network or through bridges are not visible immediately, so the actual movement of capital may differ from the on-chain picture.

Distortion of activity. The project is capable of inflating the metric of active addresses by distributing tokens or through internal “ping-pong” of funds between related wallets.

Context is needed. A high influx of stablecoins into exchanges can indicate either preparation for purchases or a desire to move into a stable asset. On-chain data is important, but without macroeconomics, news, and tokenomics, the picture will not be complete.

Cost of Advanced Data. Most platforms only provide basic statistics for free. Advanced queries, historical exports, and notifications come at a price, which limits the capabilities of retail investors.

) Tools and platforms for on-chain analysis

Platform	Focus and capabilities	Networks	Base plan cost	Suitable for
Glassnode	Hundreds of metrics, convenient charts, weekly reviews	BTC, ETH, major altcoins	Free / Advanced from $39	Retail investors, funds
CryptoQuant	Exchange flows, miner data, sentiment indexes	BTC, ETH, stablecoins	Free / Advanced from $39	Day traders
Dune	Custom SQL queries, thousands of community dashboards	EVM-compatible networks	Free / Pro from $349	Analysts and developers
Nansen	Marking of “smart” wallets, NFT and DeFi flows	EVM sets	From $150	Professional funds
Arkham	Asset movement tracking, wallet labeling	Most major networks	Starting plan from $99/month ###	For private and institutional traders, on-chain analysts
DeFi Llama	Tracking on-chain DeFi metrics	Most major networks	Free / PRO mode for $300 per month	Investors, traders

Examples of on-chain analysis work

Spring 2021. On the eve of the correction from $64,000 to $30,000, the balance of Bitcoin on exchanges sharply increased, and the MVRV exceeded 3. These two signals together warned of market overheating.
Bear Market of 2022. In June, MVRV fell below 0.85, and the fear and greed index remained in the “extreme fear” zone. Investors who applied the strategy of “accumulating when MVRV<1” benefited when the market recovered by spring 2023.
NFT Sector. Analysts at Nansen noticed a concentration of tokens in the hands of top wallets before sharp price spikes in certain collections. Tracking the addresses of “smart” capital helped to enter the market before the hype.

( Conclusion

On-chain analysis utilizes the unique transparency of the blockchain, turning “raw” transactions into fundamental signals. Metrics like exchange balance or MVRV add depth to classic methods of technical and news analysis, allowing the investor to see how capital is actually moving. However, data requires a competent context and understanding of limitations, otherwise false correlations can lead to mistakes. The best approach is to start with basic indicators, gradually adding complex tools and always cross-referencing conclusions with the overall market situation.

Practical advice: bookmark the free dashboards Glassnode and CryptoQuant for timely signals, and when you need custom analytics, switch to Dune or paid plans on Nansen. This way, you will gradually move from an observer to a full-fledged blockchain researcher and will be able to make decisions based not on emotions, but on data.

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