What is On-chain analysis?

We know that everyone actively involved in cryptocurrency investments and even those who follow technical analysis have heard of on-chain data. Practically all individuals and institutions conducting crypto analysis utilize this data for their assessments. So, what is this on-chain analysis? Before diving into the definition, it's beneficial to understand what Bitcoin (BTC) and the blockchain mechanism signify.
In the context of Bitcoin and the cryptocurrency system, it's essential for analysts to recognize that transaction data is entirely public and transparent, allowing analysts to measure the transaction activity and utility of the network at a specific time. By collecting and analyzing data on the blockchain, crypto investors can gain insights into the general sentiments and behaviors of others in the network.
What Is On-Chain Data?
It encompasses information about all transactions occurring in a specific blockchain network. In other words, it includes all data written to blockchain blocks. Since the blockchain network is public, this information is visible to everyone. The data can generally be classified into three main categories:

1. Transaction Data (sender and recipient addresses, transferred amount, remaining value for a specific address)
2. Block Data (timestamps, miner fees, rewards)
3. Smart Contract Code (i.e., logic coded on a blockchain)

On-Chain Analysis and Metrics
To conduct on-chain analysis of Bitcoin and other cryptocurrencies, various metrics are examined. Traders and investors often pair on-chain analysis with technical analysis to identify suitable short-term entry and exit points for crypto assets. Essentially, this approach, based on shared metrics and analyses, helps in forming a more accurate short or long target.
Now, let me share with you eight metrics that can be valuable for analysis:

1. Profitable Addresses at Current Price: This metric defines the average cost of addresses with a balance compared to their current price. If the current price is higher than the average cost, the address is considered "In the Money"; otherwise, it's labeled as "Out of the Money." The percentage of the investor's gain or loss is calculated based on the amount entering and leaving.
2. Focus on Major Players: This metric measures the percentage of total supply held by addresses and significant investors (whales) with more than 1% of the total supply. Monitoring where large transactions concentrate can occasionally be useful.
3. Bitcoin Price Correlation: This metric provides the 30-day correlation between Bitcoin, the flagship cryptocurrency, and another crypto asset. For example, during periods of Ethereum's rise, the price correlation with Bitcoin has been widely used. It serves as a method to measure the performance of other assets against Bitcoin.
4. Ownership Composition Based on Holding Duration: This on-chain metric expands the analysis by classifying addresses based on the duration they hold the asset. Addresses are categorized into three timeframes: Traders (up to 1 month), Cruisers (1–12 months), and Hodlers (1+ year). This helps in determining the future potential of the asset based on holding durations.
5. Tracking Transactions Larger Than $100K: This metric shows transactions larger than $100,000 that occurred in the last week. Monitoring large transactions is as crucial as tracking whale activities.
6. Transaction Demographics: The term "demographics" is used here to indicate the ratio of transactions between the Eastern and Western time zones over the past two weeks. It is a leading metric for taking actions based on news flow between the East and the West.
7. Total Exchange Inflow: This metric indicates the total cryptocurrency volume funded into leading crypto exchanges over the past 7 days.
8. Total Exchange Outflow: Conversely, this metric shows the total cryptocurrency volume leaving crypto exchanges, which is the opposite of the previous metric.

Places for On-Chain Tracking
Running a node and maintaining a full copy of a blockchain requires energy, time, and money that are not accessible to every individual or organization. Displaying captured data and metrics on a platform also demands a significant amount of energy and effort. Fortunately, various companies have emerged in the last few years, providing users with both on-chain and off-chain data. Here are the top 3 on-chain companies:

1. Glassnode
2. CryptoQuant
3. IntotheBlock