In the financial market, technical analysis methods
[1] have become so famous and familiar such as: Elliott wave, Gann, Wyckoff, Dow, Merill, Price Action, RSI, Ichimoku, MACD... This method approaches the market through price charts, volume, and open orders because traders cannot access more data from the stock or commodity market. If interested in trends in the economy or a business's financial statements, traders will need to use fundamental analysis methods.
Things were different when the crypto market appeared: because details of each transaction and account status are stored on the blockchain, in addition to price, transaction volume, and open orders on CEXs, traders have a lot of data on the blockchain for reference. This data-based market assessment has created on-chain analysis methods.
On-chain analysis, in essence, is the process of examining data directly on the blockchain to understand the behavior and actions of market participants. This data encompasses various aspects, including transaction history, wallet activity, and smart contract interactions. By meticulously analyzing this data, investors can glean valuable insights into: Market sentiment, Whale movements, Emerging trends. On-chain analysis, when employed effectively, can supplement traditional technical analysis and fundamental analysis, empowering investors to make more informed investment decisions
[2].
I'm a trader who uses technical analysis, but I'm also really surprised and interested when I read comments from traders who use on-chain analysis through Glassnode, CryptoQuant or Nansen. The story in the market becomes more interesting through the buying, selling, storing, and moving of tokens by whale, investors, or hot wallets of CEXs. Although it is known that on-chain data can be distorted or incomplete and that on-chain analysis cannot accurately predict the manipulation plans of Market makers or the current supply and demand status of each token, but their results make me feel like I can understand the market movement better, thereby being able to focus on a few important tokens instead of wasting a lot of time and effort on many other less potential tokens at that moment.
I have no intention of giving up Technical Analysis, it is the foundation and will be the direction I continue to pursue in the future. I also do not refuse to refer to comments from on-chain analysis. For me, the more data I analyze, the more reliable the prediction becomes.
Are you using on-chain analytics? What tools/websites do you often use? Do you believe that on-chain data is accurate and reliable to make investment decisions?
[1]
Technical Analysis: What It Is and How to Use It in Investing[2]
What Is Onchain Analysis, And Why Is It Useful For Crypto Traders?