Recently, many beginners have asked me how to start doing on-chain data analysis, so I’ll just summarize my experience. To be honest, whether you can understand on-chain data directly determines how long you can survive in this market.

First, it’s important to understand that on-chain data refers to the immutable information on the blockchain, including transaction records, wallet flows, miner rewards, and so on. The two main categories are: one is transaction data (token transfer amounts, holdings), and the other is block data (validation times, gas fees, etc.). Since the advent of smart contracts, we can also see interactions between wallets and contracts, such as trading on DEXs, lending, minting NFTs, and other operations.

Why emphasize on-chain queries? Because this is the most authentic and objective mirror of the market. You can track the movements of whales, see whether they are accumulating or selling off. I’ve found that many people make money by observing the behavior of smart money and then following the trend. However, it must be admitted that on-chain analysis has a certain learning curve, requiring some knowledge accumulation and multi-dimensional perspectives. Also, don’t rely on just one tool; it’s better to cross-reference multiple data sources, as the accuracy of some tools varies.

When doing on-chain queries, there are several key indicators to pay attention to. TVL (Total Value Locked) reflects the popularity of DeFi projects; the higher the number, the more confident investors are. The movement of development team and investor wallets is also very important—they’re clearly buying or selling. Exchange deposit and withdrawal data can also reveal signals; tokens flowing into centralized exchanges may indicate a correction, while large withdrawals to personal wallets are a positive sign. The inflow and outflow of stablecoins are also worth watching; more inflows suggest optimistic market sentiment, while outflows indicate pessimism. An increase in active wallets means new funds are entering; a more dispersed distribution of token holders is better, as projects concentrated in a few addresses are more susceptible to manipulation.

Regarding tools, my advice for beginners is to start simple. Defillama focuses on TVL data, has a user-friendly interface, and can also show CEX deposit and withdrawal activity, making it especially suitable for newcomers. Token Terminal is great for analyzing project finances; the higher the revenue, the more promising the project. LunarCrush analyzes social media buzz; I often use it to see how much discussion a coin has on Twitter and the attitude of key opinion leaders. CryptoSlam specializes in NFT data, tracking the flow of NFT funds across different chains.

More advanced tools include. Santiment cleans and verifies on-chain data, making it relatively reliable, and can be combined with social sentiment analysis. Arkham has recently become popular, claiming to surpass Nansen; it’s currently free and offers powerful customization features. Nansen is my most frequently used tool for tracking smart money movements, but it requires some experience to use effectively. Dune Analytics allows SQL queries on on-chain data; it’s very powerful but has a learning curve. CryptoQuant and Glassnode focus on Bitcoin analysis, including miner data and holder classifications, and are very comprehensive.

My suggestion is to first learn to interpret basic indicators using on-chain query tools, then choose more advanced tools based on your needs. The most important thing is to understand what the data means behind the numbers, rather than being intimidated by the figures. Many people give up when faced with complex dashboards; in fact, with some time and effort, anyone can learn. Additionally, you can follow some professional on-chain analysis teams; their perspectives are often more multi-dimensional and can help you avoid many detours.