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On-Chain Indicators

Explore on-chain indicators like active addresses, hash rate, MVRV Z-Score, and more. Learn how blockchain metrics reveal crypto market trends.

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On-chain indicators are metrics derived from blockchain data that provide insights into the health and behavior of a cryptocurrency network. These indicators can help traders and investors make informed decisions by analyzing real-time activity on the blockchain. On-chain indicators analyze data related to the actual usage and movement of cryptocurrencies within the network.

Here are a few on-chain indicators:

  • Active Addresses: This measures the number of unique addresses involved in transactions over a period. An increase in active addresses can indicate growing network activity and interest in the cryptocurrency.
  • Hash Rate: Particularly important for proof-of-work coins like Bitcoin, the hash rate measures the total computational power securing the network.
  • Exchange Balance: This tracks the amount of cryptocurrency held on centralized exchanges. A decline in supply on exchanges may suggest that holders are moving assets to private wallets, which is often interpreted as a bullish signal.
  • HODL Waves: This shows how long coins have been held in wallets. A large proportion of coins being held for longer periods may indicate that long-term investors are confident in the asset's future.

These are the simpler on-chain indicators. More interesting, however, are indicators that can reveal oversold or undersold conditions, or even signal the top of a market cycle. Here are some key indicators worth exploring:

  • MVRV Z-Score
  • Reverse Risk
  • Puell Multiple
  • Net Unrealized Profit/Loss (NUPL)
  • Stock-to-Flow Model
  • Fear and Greed Index
  • Pi Cycle Top Indicator

I'm not going to explain each of these indicators here. You can check out the websites listed below, where you'll find detailed explanations of all the indicators.

Do I Really Need to Understand the Calculation of the Indicators?

Don't stress too much about the exact calculations. What's important is to understand what the indicators represent and how to interpret their charts.

When Should I Use These Indicators?

These indicators offer a zoomed-out perspective of the market. They typically focus on broader time horizons, like the Bitcoin cycle, making them useful for identifying long-term trends. There's no need to check them daily; instead, review them periodically to get an idea of where we might be in the cycle.

Resources

Check out studio.glassnode.com and bitcoinmagazinepro.com for on-chain indicators. I prefer Glassnode's charts, but keep in mind that many indicators there are not free. If you're looking for free options, I suggest using Bitcoin Magazine Pro.