The market has been in a decline since the beginning of the year. During times like this, investors look for fundamental indicators that may impact the price of crypto assets.
On-chain data includes all information of all occurred transactions on a public blockchain. This data is made up of transaction data, block data, and smart contract code. The aggregation and analysis of on-chain data, has framed a new way of fundamental analysis, very similar to traditional finance analysis, such as share buybacks and amount of stock held by insiders. The difference is that public blockchains are completely transparent, and live data is available 24/7.
Some examples of valuation frameworks made from on-chain data are: blockchain usage will have a direct impact on the demand of the native coin and therefore on the price; price volatility determined by the number of coins moved on and off exchanges; and price volatility according to the change in amount of coins addresses hold.
Let us take a look at the last example. Lookintobitcoin.com aggregates bitcoin on-chain metrics into free live charts. The chart below shows the price of BTC, and addresses that hold more than 1,000 BTC – often referred to as whale addresses.
When looking at this chart, there seems to be a correlation between the number of whale addresses and the price of BTC. Before the price of BTC increased, the number of whale addresses increased. Before the price of BTC dropped, the number of whale addresses decreased. Ultimately, this indicates that whale addresses are likely able to dictate the price of BTC.
As of recent, the overall crypto market price activity has been looking dull, moving downwards and sideways. On February 27 however, there was a sudden bullish signal. In just one day, 137 addresses joined the > 1,000 BTC club. One assumption is that investors see bitcoin as a safe haven among the turmoil currently going on between governments. Another is that the BTC price is simply just too low.
You can visit the following on-chain data websites to see what other indicators are available: