When it comes to short, mid, or long-term investments in cryptocurrencies, investors have different strategies in place to guide their choices. If such strategies are, however, void of 

, there might be an impending crisis in their portfolios.

On-chain data are made publicly available on the 

 and can be accessed on any internet-supporting device across the world. Of course, this is the best time to appreciate the 

 of blockchain technology and enhance your trading strategy.

With the publicly available data, you can access the “

” of a particular crypto coin or token using the appropriate blockchain explorer. For example, 

 for BNB and BSC (Binance Smart Chain) tokens, et cetera. Aside from the rich list, information on the number of holders, transactions (IN or OUT), etc, can be monitored in real-time. 

This way, if you notice any unusual or large crypto movements, you should be able to decide on what to do with such information. Hence, Onchain analysis involves tracking cryptocurrency transactions using the appropriate blockchain explorer to make an informed investment decision. 

 — Proof-of-Work (PoW) and Proof-of-Stake — there are metrics that differentiate them.

As stated above, there are some on-chain data similar between PoS & PoW coins. You can easily track cash flows (or transfers), user count, wealth distribution, block size, and rewards (miner or staking rewards) in both cases. However, tracking other metrics on one could be more difficult.

I digress! Validators on a proof-of-stake network maintain its integrity by committing at least the minimum amount of crypto specified by the network into the staking pool. However, they are being rewarded for every transaction they confirm depending on their holdings. Examples of PoS coins include Binance coin, Tezos, Cardano, and ETH 2.0.

On the other hand, miners are responsible for maintaining the integrity of a Proof-of-work network and are also rewarded for their contributions. No staking is required, only power consumption.

Onchain analysis on a PoS network could sometimes be difficult because the actual coin or token distribution could be concealed in staking contracts. This way, you might find it uneasy about telling which wallets the staked coins or tokens belong to.

Although this tells you what investors are doing with their tokens, it could impact the price of such tokens if investors with large holdings decide to unstake and probably sell. If more tokens are staked, it implies they won’t be sold soon. You can view the staking percentage to make an informed decision.

While such information is not available for PoW coins, investors could draw the same reference by monitoring exchange balances. The lower the exchange balances, the higher the price volatility. For BTC and ETH, you could also monitor the number of coins held by whales as well as the growth of coin holders with non-zero balances.

Before going into the benefits of on-chain analysis, you should understand the on-chain data listed below are the most important and you should be familiar with them.

 Monitoring any (or a combination) of these metrics gives you an insight into what is going on within the network. In a case whereby you see any unusual transaction, you can easily make a quick decision to safeguard your investment.

 However, you should keep a tab on the top wallets on whatever explorers or tools you're using for your on-chain analysis. Some of these wallets are labeled and could make things easier. 

 Using the polygon network as an example. Some of the top wallets represent a contract address (with a paper sign) while others are not. You could see a wallet labeled as "Polygon (Matic): Foundation Contract" and in case you notice any unusual transfers out of the wallet, you should be wary of what's going to happen next.

 In that case, you could track down the receiving address; if it's an exchange wallet, polygon foundation is likely dumping their bag and you don't want to be dumped on.

Basically, it helps you protect your capital, assists in profit-taking from a project, and even minimizes your losses.

Top Tools/Platforms For On-Chain Analysis

There are various tools or platforms for on-chain analysis. Some of them are free and could serve the purpose it is intended for, however, others are premium and tend to provide in-depth on-chain data. 

Why don't we take a quick dive into these tools for you to decide on which to use?

Glassnode offers both free and premium plans for crypto users. With the free plan, the number of indicators or on-chain data you have access to should suffice for your analysis except if you're looking for more elaborate information.

Although some indicators (like granular data for the hourly timeframe) lag in the free mode, you can opt for the premium version for better accuracy and precision. 

However, glassnode regularly publishes reports on on-chain data. The platform also offers a free academy where you can learn about various analysis concepts and on-chain indicators.

Dune is a powerful research tool that makes it quite easy for crypto traders to access, analyze, and visualize blockchain data. The dashboard provides you with detailed analytics of your preferred market. Therefore, making it easy to make quick and informed decisions.

Although it uses "SQL syntax" and the knowledge of such language might be required, you could make use of the available dashboards that fit your needs.

Coinmetrics allows investors to access vital on-chain data for all major cryptocurrencies. They offer four different products including; network data, market data, indexes, and third-party data.

The market data provides information on the top 20 global exchanges. The network data includes visualization tools, coinage metrics, on-chain exchange flows, and transaction backgrounds. However,

This platform delivers on-chain analytical results for cryptocurrencies through the use of machine learning. Its indicators are, however, categorized into four different groups that include; ownership, financial, network, and social.

Based on the holdings and holding period, the ownership indicator provides information on the "capital stack" of an underlying crypto asset. The “financial” provides information on the price and profitability or monetary value of transactions.

The “Network” measures user growth, transaction activity patterns, and costs; while the social indicator provides information on the crypto Telegram & Github.

Information provided by CryptoQuant includes miner data, on-chain data, exchange data, and network data with a focus on Bitcoin, stablecoins, ethereum, and ERC-20 tokens.

The importance of on-chain analysis cannot be overemphasized. We have clearly stated the important metrics to note and what they imply. Investors or traders who have included on-chain analysis as part of their trading strategies usually have an edge in the market over others. Of course, you could use it in addition to technical analysis by relating the on-chain data to price action on the chart. Therefore, it is advisable you consider on-chain analysis if you have not been using it.