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With the constant evolution of Decentralized Finance (DeFi), the need to stay one step ahead of the curve is crucial for investors. There is always a critical need for adequate information and sufficient data to enable these investors and traders to make informed financial decisions. The two popular age-long methods employed to make these decisions have always been Fundamental Analysis, which evaluates an asset’s intrinsic value, and Technical Analysis, which relies on charts, patterns, and indicators. However, these “traditional” research and analysis methods have proven less reliable, especially in the face of unfavorable market conditions.

The need to explore innovative approaches and tools has arisen due to this problem. This has brought about a recent surge in the popularity of on-chain analysis and analytic tools, which are now perceived as the new kid on the block. This perception (or rather a misconception) is somewhat surprising given that all blockchain transactions have been “on-chain” since inception.

Having re-established that all blockchain transactions are recorded on-chain, one important question that comes to mind is; why are we just discovering this approach and its importance now? In order to answer this question, we must understand what on-chain analysis is…

… On-chain analysis is simply analyzing the data and transactions recorded in the blockchain in order to gain valuable insights into market trends, investor behavior, and asset movement. Active wallet addresses, number of token holders, transaction volume, tracking of specific wallets, token distribution, and transaction volume are a few among the numerous metrics that can be obtained by leveraging on-chain analysis tools.

Image: etherscan.io

From my point of view, the emergence of this approach is mainly as a result of two reasons viz;

Euphoria and Hype.

Almost every token pumps (and dumps in some cases) during a bull run. These favorable market conditions can be misleading and often make us view the market through rose-colored glasses which can lead to unrealistic expectations. Speculation and euphoria are high with positive market sentiments all in the air that people are unable to filter the noise. A mere surface analysis of an asset’s fundamentals could be enough to give a trader/investor massive returns as long as there is a good entry and exit point. Hence, the need for proper research, innovation, and due diligence is often relegated to the background.

Innovation.

Before now, the only way to carry out analysis on-chain was through monitoring transactions directly from blockchain explorers like etherscan, blockchain.com, etc, or via dashboards from Dune Analytics. Users needed to have a high level of experience and expertise in order to get the desired metrics. In recent times, the emergence of innovative tools has reduced the technicalities of obtaining data and key information on-chain thereby making the process a seamless one. We will take a look at a few of the top tools used for on-chain data analysis and visualization. Below, we’ll list some top tools popularly used by investors.

SOME TOP ON-CHAIN ANALYSIS TOOLS

Bubblemaps.

Bubblemaps is a user-friendly on-chain analysis tool, one of my favorites. It is fun to use with a relatable user interface, with bubbles that represent wallets in an easy-to-understand way that enables users to explore wallets and reveal connections.

According to their website;

“ Bubblemaps is the first supply auditing tool for DeFi tokens and NFTs. Our unique and colorful bubbles make on-chain data easy to understand. Investigate wallets, reveal connections, and see through the noise of blockchain data”

Image: Bubblemaps on X (Formerly Twitter)

Bubblemaps has become one of the most used tools with integrations and partnerships with various top blockchain projects like Fantom Foundation, OpeanSea Pro, Kyber Network, Apeswap, and BNB Chain.

Arkham Intelligence

A blockchain analysis platform that leverages Artificial intelligence to identify and reveal the identities behind blockchain transactions and data on-chain, Arkham’s main goal is to “de-anonymize the blockchain”. Often touted as the “CIA of blockchain”, Arkham offers a platform that enables users to trade address labels and other critical intelligence via its Intel Exchange bounty marketplace. Other useful tools on its website include a Dashboard, Alerts, Trace, Oracle, and Visualizer— A graph representing transactions between addresses and entities, similar to Bubblemaps.

Image: glassnode

Glassnode.

Glassnode provides in-real-time data across various key metrics like number of active wallets and number of holders, Stock-to-Flow ratio, price drawdown from ATH, circulating supply, etc. You can find all metrics on the Glassnode studio metric catalog. Other core products are the Studio, which provides users access to all chats and metrics, and an Academy to easily help users build their knowledge about the platform and how to navigate it for optimum results.

Dune Analytics.

This is one of the oldest and most popular on-chain analytic tools with a very massive community of researchers. Users can query, discover, and create custom dashboards–make data visualizations that are relatable and insightful. These activities cut across EVM and non-EVM chains, DEXs, NFT marketplaces, and DAOs amongst others.

Blockchain Explorers.

Blockchain explorers are web-based tools that allow users to browse and interact with the data stored on a blockchain. They act as a window into the blockchain, providing real-time information and updates on transactions, addresses, blocks, and network activity. Examples of these explorers are Etherscan, bscsan, Blockchain.com, cardanoscan, and TONviewer

There are a plethora of on-chain analysis tools utilized according to user preference, worthy of mention are Nansen, Chainalysis, Metasleuth, Breadcrumbs, and Token Terminal amongst others.

In conclusion, a mastery and fusion of on-chain analytics tools and skills into the popular “traditional” methods of market research is a very important armor to thrive in this financial space.