Ahead of the much anticipated crypto bull-run, real time monitoring of blockchain transactions puts great traders on the spotlight. To break even in your trades, you may need to include on-chain analysis to your market analysis tools. The reason is that on-chain analysis has emerged as a powerful tool for cryptocurrency traders seeking deeper insights into market activities. By surveying blockchain data, traders can gain valuable information earlier about market inflows and outflows, anticipate price movements, and make more informed trading decisions.

Further in this article, we will explore how to leverage on-chain analysis to enhance trading strategies.

What is on-chain analysis

On-chain analysis is a market analysis strategy used by blockchain traders. It is the use of relevant blockchain data to examine transactions, wallets, trade activities, and asset holdings to understand the market moves of individual and institutional traders. With on-chain analysis, traders can easily predict how large token holders are reacting to market events. It also helps traders to align their trading strategies with these insights.

There are other market analysis tools, which includes technical analysis, fundamental analysis, and sentimental analysis. However, these tools only reflect the aftermath of activities happening on-chain. Hence, on-chain analysis reveals real-time market insight earlier. Traders who use on-chain analysis for trading often record higher trade wins.

Key data-points to watch during on-chain analysis

Monitor activities of whales and institutions

Large holders of cryptocurrency, often referred to as ‘whales’, drive significant influence over market trends. Tracking their activities on the blockchain via on-chain analysis can provide valuable insights into their trading behavior. By monitoring whale addresses and transaction volumes, traders can predict the next move of these influential players. For example, a sudden surge in whale token purchases may signal impending market volatility, prompting traders to make more buying decisions and stay bullish in their trade positions..

Track Smart Money Wallets

Smart money refers to institutional investors and individuals who possess sophisticated market knowledge and resources. The activities of smart money wallets trigger intense activities on the blockchain including liquidity for the tokens they hold. By identifying the tokens that smart money wallets hold, large transfers or accumulation of specific assets, traders can predict the intentions of smart money investors. This information can be invaluable for making strategic trading decisions and positioning oneself ahead of market movements driven by institutional activity.

Monitor who is buying or selling what token

Traders can focus on discovering who is holding what token rather than the wallet address. By monitoring who the buyer or seller of a token is, traders can gauge the level of impact their activities will have on the market. For example, a significant increase in the purchase of BTC by the Nigerian Government will simply trigger Nigerian trader’s expectations upward..

Watch On-Chain Capital Inflow

Capital inflow refers to the movement of funds into the cryptocurrency market, thus having a significant impact on price action. With on-chain analysis, traders can monitor the inflow of capital from fiat currencies or other cryptocurrencies into the market. Also, analyzing the sources of capital inflow can power insights into market sentiment and investor behavior.

Ending Notes

On-chain analysis offers traders a powerful toolkit for making informed trading decisions in the cryptocurrency market. As traders swing into action in the incoming crypto bull run, on-chain analytics tools will boost their trading strategies and help them align with the activities of big players. Notwithstanding, it's essential to combine on-chain analysis with other fundamental and technical indicators to form a comprehensive trading strategy. With diligent analysis and a deep understanding of blockchain data, traders can navigate the cryptocurrency market with confidence and precision.