In the cryptocurrency market, data has always been an important starting point for people to make trading decisions. How can we cut through the data fog and discover effective data to optimize trading decisions? This is a topic that the market continues to pay attention to. This time, OKX specially planned the "Insight Data" column, and cooperated with industry data platforms such as CoinGlass, AICoin, Coingecko and 0xScope to jointly start from common user needs, hoping to unearth more systematic data methodologies for market reference and learning.
The following is the content of the fifth issue, which was jointly developed by the OKX Web3 team and the 0xScope team around topics such as "How to establish an on-chain data analysis methodology". I hope it will be helpful to you.
About 0xScope: 0xScope is Web3’s leading data analytics and AI data provider. It is creating a universal Web3 LLM, dedicated to using AI to reduce the problem of users understanding Web3 and the difficulty of interacting with Web3. This is due to the rich variety of Web3-related data that the 0xScope team began to accumulate in 2022, which has been adopted by nearly 200 Web3 professional institutions. Currently, 0xScope’s Scopescan and Scopechat have been adopted by more than 1 million users.
About OKX Web3: The team brings together top talents with deep technical backgrounds and rich industry experience. They have continued to innovate and practice in the Crypto field for many years, and continue to focus on user experience and security. At present, OKX Web3 wallet is the most comprehensive decentralized multi-chain wallet on the market, supporting 90+ public chains, with built-in five major sectors: wallet, transaction, NFT market, DeFi, and Dapp discovery. Users can view multi-chain tokens, NFTs, and DeFi assets through App, plug-in, and web pages.
1. On-chain data analysis is very important. How should a novice take the first step?
0xScope: First, you need to understand the basic concepts and logic, such as address, amount (amount), sender (from), receiver (to), and gas cost (gas), etc. And try to use and understand the most basic blockchain browser, and then use other tools for more detailed analysis.
Generally, commonly used analysis platforms or tools include on-chain data platforms, blockchain browsers and API interfaces. On-chain data platforms such as ScopeScan, ScopeChat, Nansen, Glassnode and Dune Analytics provide convenient data access and analysis capabilities. Blockchain browsers such as Etherscan and Blockchain.com Explorer can manually query block, transaction and account information. In addition, many blockchain networks and data providers (such as Etherscan API and CoinGecko API) provide API interfaces to programmatically obtain on-chain data.
In addition, on-chain data analysis is mainly divided into two categories: transaction type and survey type. Transaction data analysis can discover early alpha or trends through on-chain data, or formulate trading strategies by analyzing fundamental data of transaction targets. Investigative data analysis can discover the flow of funds and potential address map relationships through on-chain data, or find the real reasons behind abnormal events through data correlation.
OKX Web3: On-chain data analytics is about gaining insights into network activity, user behavior, and market trends by examining and interpreting data recorded directly on the blockchain. For new users looking to take their first steps into on-chain analytics, here are some key points:
First, familiarize yourself with a blockchain browser such as Etherscan to understand basic transaction data and wallet activity. Secondly, pay attention to key on-chain indicators such as active addresses, transaction volume and supply distribution. Next, explore user-friendly on-chain analytics tools like Nansen, Debank, and Glassnode to visualize on-chain data.
Start with basic metrics, tracking simple data points like the number of daily active addresses or transactions. At the same time, understand how on-chain data relates to market movements and trader behavior, and identify patterns and correlations with price movements by analyzing historical data. Finally, combine on-chain analysis with fundamental and technical analysis to gain a more comprehensive perspective.
2. What key indicators need to be focused on?
0xScope: It mainly depends on the needs and scenarios:
If your strategy is fundamental analysis or long-term trading, we recommend focusing on the following 10 indicators:
– The number of transactions, which is the total number of transactions that occur on the blockchain network within a period of time, which usually reflects the activity and usage of the network;
– Number of active addresses, the number of unique addresses with transaction records within a period of time. The greater the number of active addresses, the higher the participation of network users;
– The number of new addresses refers to the number of new addresses created within a period of time. The increased number of new addresses usually indicates that the network has attracted new users and indicates the user growth of the network;
– Transaction fees, the total fee paid by users for transactions. High transaction fees may indicate high network demand, reflecting the congestion level of the network and the cost that users are willing to pay;
– Average transaction value, the average amount of each transaction. A higher average transaction value may indicate more large transactions, which helps to understand the flow of funds and user trading habits;
– Liquidity, that is, the tradable volume of assets in decentralized exchanges (DEX). Markets with high liquidity are usually more stable and healthy, affecting transaction slippage and market depth;
– Token holding concentration, the distribution of token holders, such as the proportion of the total amount held by the top 10/50/100 holders. High holding concentration may lead to an increase in the risk of market fluctuations. Understanding token holdings Some concentration and market risks;
– Total Value Locked (TVL), the total value locked in the DeFi protocol. A high TVL usually indicates that the protocol is popular and widely used, measuring the scale and popularity of the DeFi protocol;
– Number of smart contract calls, the number of calls to a smart contract within a period of time. A high number of calls indicates that the contract is widely used, reflecting the usage and popularity of the smart contract;
– Developer activity, the update frequency of the project code base and the number of contributors. High developer activity indicates that the project is continuously improving and developing, reflecting the development progress and activity of the project.
If your strategy is short-term trading or you hope to make profits by seizing the trend, we recommend paying attention to overbought and oversold conditions on decentralized exchanges, which reflect abnormal fluctuations in current market demand, as well as large deposits or withdrawals on exchanges Because this can reveal the potential trading intentions of the main force.
If your strategy is copy trading, you can pay more attention to the dynamics of smart money. For example, the historical returns of smart money can help identify traders with strong long-term profitability; the frequency and quantity of transactions can let you understand the activity and market participation of smart money. Trade success rate evaluates the smart money's trading accuracy, while holding period reveals whether its strategy is short-term or long-term. Asset distribution shows how diversified its portfolio is, and transaction fees reflect its transaction costs. Risk-adjusted returns measure the smart money’s ability to gain returns while controlling risks, and the smart money’s on-chain reputation demonstrates its evaluation in the community. In addition, liquidity supply helps understand whether smart money is also providing liquidity, which may affect their trading behavior. Through these indicators, smart money dynamics can be better understood and tracked.
If you are detecting risks, it is recommended to focus on at least the following 10 key indicators:
– The number of abnormal transactions, that is, the number of transactions that is significantly higher than normal levels within a specific time period, which can help identify potential attacks or unusual activities, such as hacking or fund transfers;
– Large transfers refer to transactions exceeding a certain amount threshold, which may indicate asset theft, money laundering or evasion of detection;
– Transaction frequency, that is, the number of transactions per unit time. Abnormally high transaction frequency may indicate an ongoing attack or fraud;
– A large number of transactions from new addresses. Newly created addresses carry out a large number of transactions in a short period of time. This may be a means used by attackers to hide their identity. By observing these addresses, the source of the attack can be identified;
– Smart contract calls, transaction calls involving smart contracts, smart contracts may be the target or tool of attacks, and by analyzing these calls, the attacker’s operating methods can be understood;
– Token transfer, the transfer of specific tokens in the network, abnormal transfers can point to specific attacks, such as token theft or illegal transfer;
– Abnormal gas fees, significantly higher or lower than average transaction fees. Attackers may use high gas fees to accelerate transactions, or low gas fees to hide large batches of tiny transactions;
– Transaction interval, that is, the time interval between consecutive transactions. Continuous transactions in a short period of time may indicate the use of automated attacks or trading scripts;
– Abnormal activities of protocols and contracts on the chain, a surge in activity of specific protocols or smart contracts, which may be caused by attackers exploiting vulnerabilities or problems within the protocol;
– Account balance changes, that is, significant changes in the account balance, which can help users identify theft or transfer of funds.
In fact, in general, these indicators are essentially the traces left by the main traders. Beginners can feel the market changes by analyzing these traces.
OKX Web3: For beginners, we recommend focusing on the following 4 key indicators to gain a deeper understanding of the blockchain network and market dynamics:
– Number of active addresses: This metric provides a basic understanding of network usage and economic activity. By observing changes in active addresses, beginners can get a sense of how active the network is and how engaged its users are.
– Trading Volume: Trading volume is an important indicator for assessing market activity and helps understand buying or selling pressure in the market. High trading volume usually means that market participants are more active, while low trading volume may indicate that the market is on the sidelines.
– MVRV (Market to Realized Value) and NUPL (Unrealized Profit to Loss): These indicators provide great insights into market valuation and overall sentiment. MVRV can help evaluate whether the market pricing of the token is reasonable, while NUPL can show whether investors are currently making profits or losses.
– Supply distribution: This metric shows the concentration of token ownership. By analyzing the supply distribution, beginners can understand whether a coin is too concentrated on a few addresses, which may have an impact on the liquidity and stability of the market.
As beginners become more familiar with these basic metrics, they can gradually incorporate other more complex metrics into their analysis, such as on-chain transaction fees, mining difficulty, network hash rate, etc., thereby improving their overall understanding of the blockchain. Understanding of chain networks and markets.
3. How to identify emerging Web3 projects through on-chain data?
0xScope: A very simple way is to pay attention to the GAS consumption rankings every day. Most of the abnormally increased contracts reflect some of the hot projects that day or recently.
A more efficient way is to use Etherscan's Chrome GAS plug-in. You can see the current GAS level at any time in the upper right corner of the browser. When you find that the GAS is soaring, you can use the Top Gas Consumer ranking we just mentioned. Or use Etherscan's Gas Tracker to see where everyone's gas is spent. Usually you can find some new projects in this case.
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The most commonly used one is Scopescan’s Top Gas Consumer ranking. If you often look at this list, you will find that in most cases the top of the ETH chain rankings are Uniswap router, USDT contract, and several TG bots such as Banana Gun. . If you find a contract you are not familiar with in this ranking, you can check whether the contract has a tag on Scopescan or Etherscan; for students who are more hands-on, you can also check who deployed this contract and his Where does the handling fee come from? Another way is to take a look at our Project Explorer rankings on Scopescan. If you suddenly find a project you have never seen appear on this ranking (TVL Rank and User Rank), it also means that this project is worth checking out. .
OKX Web3: In fact, there are many ways we can identify emerging on-chain projects. First, monitoring on-chain activity is a crucial step. This includes tracking new smart contract deployments, looking for increased transaction volume, and unique addresses interacting with contracts. By analyzing the gas usage of a new project, you can gain an in-depth understanding of its activity and development progress in the blockchain ecosystem.
Secondly, using customized dashboards provided by data aggregation platforms such as Dune Analytics, nansen and Glassnode tools can more effectively track and analyze key indicators of emerging projects. These platforms are able to not only monitor the total value locked growth of decentralized finance projects, but also track the daily active users of dApps and games, and evaluate the transfer volume and holder growth of new tokens.
In addition to on-chain data, you also need to pay attention to the cross-reference of off-chain data. Monitoring social media activity and community growth, observing developer activity on GitHub repositories, and analyzing price movements of project tokens and trading volumes on exchanges are all important additions to assessing the potential of emerging projects. The comprehensive use of these methods and data sources will help comprehensively evaluate and identify emerging Web3 projects with value and development potential.
But if you find it very cumbersome, you can also directly check information such as lock-up volume TVL, DEX transaction volume, and lending status of DeFi, DEX and other on-chain protocols in the ranking list in the OKX Web3 wallet discovery section, which is very convenient.
4. What are the common misunderstandings and precautions when conducting on-chain data analysis?
0xScope: We believe that when conducting on-chain data analysis, you need to pay attention to several common misunderstandings and important matters:
First, there are common misconceptions about address labels and activities. For example, transfers do not always represent buying and selling activities, and deposit and withdrawal activities on exchanges do not necessarily reflect actual buying and selling activities. In order to provide liquidity, market makers will frequently conduct deposit and withdrawal operations, so only when the volume of these operations is significantly higher than usual levels should it be regarded as a potential market signal.
Second, most users typically use more than one address, so analysis should consider activity as a whole rather than individual addresses. However, smart money may move funds through deposits and withdrawals on centralized exchanges, which means that analysis relying solely on on-chain data will not always successfully capture all situations. In addition, over-reliance on a single data source is risky, and it is recommended to combine off-chain data for comprehensive analysis. For example, when there are sudden moves in the market, understanding possible background news, such as important economic data released by the government, can help provide a more comprehensive market context.
Furthermore, when it comes to the information or opinions released by KOLs, they usually only focus on specific transaction events without in-depth analysis of the real situation of the addresses and entities behind them. Therefore, it is up to analysts to dig deeper and understand the stories behind the data. Finally, it is recommended to choose data analysis products that have been in business for a long time and have a good reputation, which can improve the reliability of data and the accuracy of analysis.
OKX Web3: I agree with 0xscope’s point of view. New users must pay attention to several common misunderstandings and important matters when conducting on-chain data analysis.
First, data accuracy and reliability are crucial. On-chain data may be affected by various factors, resulting in incomplete or inaccurate data. In addition, one needs to be wary of possible data manipulation by project teams or large holders, which could mislead analytical results.
其次，容易發生的誤解是對數據的錯誤解讀。在分析鏈上指標時，理解上下文是非常關鍵的，避免僅根據孤立的數據點得出結論，而忽略整體市場情況的影響。
Additionally, overreliance on a single indicator is a risk. Relying on just one or two on-chain metrics to make decisions should be avoided, instead a combination of metrics should be used and cross-referenced with off-chain data to obtain a more comprehensive and reliable analysis.
Finally, be aware that there is a gap between on-chain data and reality. For example, some on-chain activities may not be fully captured, such as off-chain transactions or the impact of second-layer solutions. Therefore, understanding the limitations of the data being used is a critical step in conducting effective analysis.
Conclusion
The above is the fifth issue of the "Insight Data" column launched by OKX, which focuses on practical topics such as how novice players can establish on-chain data analysis methodologies, hoping to provide a reference for newbies getting started. In future series of articles, we will continue to explore more practical data usage/analysis methods to provide a reference for traders and new players to learn trading and understand the industry.
Risk warning and disclaimer
This article is for reference only. This article only represents the author's views and does not represent OKX's position. This article is not intended to provide (i) investment advice or investment recommendations; (ii) an offer or solicitation to buy, sell or hold digital assets; (iii) financial, accounting, legal or tax advice. We do not guarantee the accuracy, completeness or usefulness of such information. Holding digital assets, including stablecoins and NFTs, involves a high degree of risk and may fluctuate significantly. You should carefully consider whether trading or holding digital assets is suitable for you based on your financial situation. Please consult your legal/tax/investment professional regarding your specific situation. Please be responsible for understanding and complying with applicable local laws and regulations.
This article Insight Data Issue 05 | OKX Web3 & 0xScope: Guide to on-chain data analysis, how can newbies take the first step? First appeared in Chain News ABMedia.
