On Chain Analysis: Part 1
We will talk about why you need to be able to use on-chain analysis to make your investment decisions. With the use of on-chain analysis, we can see what's happening on a blockchain network in real time; who is the whale (owns the most coins)? Coins that are entering or leaving exchanges? Are investors in profit now? The ability to see the health of your financial system in real time is invaluable, and you should use it!
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Use the following metrics to make better decisions on your trading strategy:
Measuring the strength of a network.
See who’s buying and selling.
Evaluating an asset’s price.
Measure the Strength of a Network 💪🏽
When investing into a coin make sure the network is relatively strong. How secure is it? Is it being used? How does it’s monetary policy function? Is the network growing? Look at the indicators below to analyze this!
See who’s buying and selling 🐳
The following indications more accurately reflect the short- to mid-term market movement than the on-chain metrics discussed above, which show how the network is doing over the long run. They can specifically display the amount that miners, exchanges, and private individuals are holding. Indicators of market sentiment, such as whether they are currently making money or losing money, are also displayed.
If, for instance, a lot of long-term individual investors moved a lot of coins onto exchanges and we knew they had all made sizable profits over the previous six months, it might be a sign that they are getting ready to sell and that the market is due for a correction.
Realised profits and losses
Supply in profits and loss
Evaluating price action! 🎬
The following indicators below will give you a good sense of when to be aggressive or cautious. The following trends are perfect for making short term decisions!
Market Value to Realized Value (MVRV)
Network Value to Transaction (NVT)
Stable coin Supply Ratio (SSR)
Look out for part 2 where we use a few of these metrics for some really cool projects in the space!
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