What is the Benefit of On-Chain Data?

What is on-chain data?

On-chain refers to the data on a blockchain.

So, what is a blockchain? A blockchain is essentially an accounting ledger. Miners add new pages (blocks) to this ledger. Each page shows us who sent how much Bitcoin (and other cryptocurrencies on other blockhains) to whom:

• Did a whale that has been holding for 10 years make a move?

• Are ETF investors accumulating?

But is that all? Of course not.

• What is the profit ratio, PnL, (MVRV) of a 10-year whale before they sell?

• What is their realized profit/loss ratio (SOPR) after selling?

• What is the growth rate of new users (new active addresses)?

As you can see, on-chain data doesn't just tell us who did what; it also provides powerful signals about the behavior of all investor groups. Some of these investor groups include:

• Retail

• Short-term holders (less than 155 days)

• Long-term holders (more than 155 days)

• Institutions (corporations)

• Financial firms (ETFs)

• Whales (holding 1,000 BTC or more)

• Exchanges

• Miners

How on-chain data is different than market data?

Traditional finance tells a story primarily through price and volume.

However, price and volume are the results. Blockchain data, on the other hand, gives us crucial insights not just from the outcome (price), but also into investor psychology.

What on-chain data shows?

On-chain data isn't just for financial speculation.

It also allows us to measure the fundamental health and security of the blockchain network. Metrics like Hash Rate (the network's processing power) and Miner Revenue show how secure the network is and how incentivized miners are to support it. A rising Hash Rate indicates a strong network resilient to attacks, which in turn boosts investor confidence.

So, how does this help us?

Benefits of on-chain data?

To verify the narrative with data!

The crypto market is often driven by "narratives" created on social media and in the news. On-chain data is the most objective tool to check how well these narratives align with reality.

For example, while the media might report that "everyone is panic selling," on-chain data could reveal that long-term investors and whales actually view the dip as a buying opportunity and are accumulating at record levels.

A few additional quick facts:

• Records made on the blockchain are immutable.

• This data is public and accessible to everyone.

• Companies like Nodely make this raw data usable and understandable.

• The blockchain shows us "addresses" (e.g., bc1qxy2kgdyg...), not real-world "identities" (e.g., John, Jane). Understanding who owns these addresses (an ETF, a whale, an exchange, etc.) is possible thanks to advanced heuristics and clustering algorithms used by on-chain analysis firms.

Thanks for reading.