On-Chain Analysis [LuxAlgo]

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The On-Chain Analysis tool offers a comprehensive overview of essential on-chain metrics, enabling traders and investors to grasp the underlying activity and sentiment within the cryptocurrency market. By integrating metrics like wallet profitability, exchange flows, on-chain volume, social sentiment, and more into your charts, users can gain valuable insights into cryptocurrency network behavior, spot emerging trends, and better manage risk in the cryptocurrency market.

🔶 USAGE



🔹 On-Chain Analysis

When analyzing cryptocurrencies, several fundamental metrics are crucial for assessing the value and potential of a digital asset. This indicator is designed to help traders and analysts evaluate the markets by utilizing various data gathered directly from the blockchain. The gathered on-chain data includes wallet profitability, exchange flows, miner flows, on-chain volume, large buyers/sellers, market capitalization, market dominance, active addresses, total value locked (TVL), market value to realized value (MVRV), developer activity, social sentiment, holder behavior, and balance types.

Use wallet profitability and social sentiment metrics to gauge the overall mood of the market, helping to anticipate potential buying or selling pressure.



On-chain volume and active addresses provide insights into how actively a cryptocurrency is being used, indicating network health and adoption levels.



By tracking exchange flows and holder balance types, you can identify significant moves by whales or institutions, which may signal upcoming price shifts.



Market capitalization and miner flows give you an understanding of the supply side of the market, aiding in evaluating whether an asset is overvalued or undervalued.



The distribution of holdings among retail investors, whales, and institutional groups can greatly influence market dynamics. A large concentration of holdings by whales may indicate the potential for significant price swings, given their capacity to execute substantial trades. A higher proportion of institutional investors often suggests confidence in the asset's long-term potential, as these entities typically conduct thorough research before investing. While retail participation indicates broader adoption, it also introduces higher volatility, as these investors tend to be more reactive to market fluctuations.



Understanding the balance and behavior of short-term traders, mid-term cruisers, and long-term hodlers helps traders and analysts predict market trends and assess the underlying confidence in a particular cryptocurrency.



🔶 DETAILS

This script includes some of the most significant and insightful metrics in the crypto space, designed to evaluate and enhance trading decisions by assessing the value and growth potential of cryptocurrencies. The introduced metrics are:

🔹 Wallet Profitability

Definition: Represents the percentage distribution of addresses by profitability at the current price.

Importance: Indicates potential selling pressure or reduced selling pressure based on whether addresses are in profit or loss.

🔹 Exchange Flow

Definition: The total amount of a cryptocurrency moving in and out of exchanges.

Importance: Large inflows to exchanges can indicate potential selling pressure, while large outflows might suggest accumulation or long-term holding.

🔹 Miner Flow

Definition: Tracks the inflow and outflow of funds by miners.

Importance: High inflows could indicate selling pressure, whereas low inflows or outflows might reflect miner confidence.

🔹 On-Chain Volume

Definition: The total value of transactions conducted on a blockchain within a specific period.

Importance: On-chain volume reflects actual usage of the network, indicating how actively a cryptocurrency is being utilized for transactions.

🔹 Large Buyers/Sellers

Definition: Tracks the number of large buyers (bulls) and sellers (bears) based on transaction volume.

Importance: Comparing the number of large buyers (bulls) to large sellers (bears) helps gauge market trends and sentiment.

🔹 Market Capitalization

Definition: The total value of a cryptocurrency's circulating supply, calculated by multiplying the current price by the total supply.

Importance: Market cap is a key indicator of a cryptocurrency’s size and market dominance. It helps compare the relative size of different cryptocurrencies.

🔹 Market Dominance

Definition: Market dominance represents a cryptocurrency’s share of the total market capitalization of all cryptocurrencies. It is calculated by dividing the market cap of the cryptocurrency by the total market cap of the cryptocurrency market.

Importance: Market dominance is a crucial indicator of a cryptocurrency's influence and relative position in the market. It helps assess the strength of a cryptocurrency compared to others and provides insights into its market presence and potential influence.

Special Consideration: Since BTC and ETH dominance is relatively high compared to other cryptocurrencies, specific adjustments are made during the presentation of values and charts. When analyzing BTC, the total market capitalization is used. For ETH analysis, BTC is excluded from the total market cap. For any other cryptocurrency besides BTC and ETH, both BTC and ETH are excluded from the total market cap to provide a more accurate view.

🔹 Active Addresses

Definition: The number of unique addresses involved in transactions within a specific period.

Importance: A higher number of active addresses suggests greater network activity and user adoption, which can be a sign of a healthy ecosystem.

🔹 Total Value Locked (TVL)

Definition: The total value of assets locked in a decentralized finance (DeFi) protocol.

Importance: TVL is a key metric for DeFi platforms, indicating the level of trust and the amount of liquidity in a protocol.

🔹 Market Value to Realized Value (MVRV)

Definition: A ratio comparing the market cap to realized cap.

Importance: A high ratio may indicate overvaluation (potential selling), while a low ratio could signal undervaluation (potential buying).

🔹 Developer Activity

Definition: The level of activity on a cryptocurrency’s public repositories (e.g., GitHub).

Importance: Strong developer activity is a sign of ongoing innovation, updates, and a healthy project.

🔹 Social Sentiment

Definition: The general sentiment or mood of the community and investors as expressed on social media and forums.

Importance: Positive sentiment often correlates with price increases, while negative sentiment can signal potential downtrends.

🔹 Holder Balance (Behavior)

Definition: Distribution of addresses by holding behavior: Traders (short-term), Cruisers (mid-term), and Hodlers (long-term).

Importance: Helps predict market behavior based on different holder types.

🔹 Holder Balance (Type)

Definition: Distribution of cryptocurrency holdings among Retail (small holders), Whales (large holders), and Investors (institutional players).

Importance: Assesses the potential impact of different user groups on the market. A more decentralized distribution is generally viewed as positive, reducing the risk of price manipulation by large holders.

These metrics provide a comprehensive view of a cryptocurrency’s health, adoption, and potential for growth, making them essential for fundamental analysis in the crypto space.

🔶 SETTINGS

The script offers a range of customizable settings to tailor the analysis to your trading needs.

🔹 On-Chain Analysis

• On-Chain Data: Choose the specific on-chain metric from the drop-down menu. Options include Wallet Profitability, Exchange Flow, Miner Flow, On-Chain Volume, Large Buyers/Sellers (Volume), Market Capitalization, Market Dominance, Active Addresses, Total Value Locked, Market Value to Realized Value, Developer Activity, Social Sentiment, Holder Balance (Behavior), and Holder Balance (Type).
  
• Smoothing: Set the smoothing level to refine the displayed data. This can help in filtering out noise and getting a clearer view of trends.
  
• Signal Line: Choose a signal line type (SMA, EMA, RMA, or None) and the length of the moving average for signal line calculation.
  

🔹 On-Chain Dashboard

• On-Chain Stats: Toggle the display of the on-chain statistics.
  
• Dashboard Size, Position, and Colors: Customize the size, position, and colors of the on-chain dashboard on the chart.
  

🔶 LIMITATIONS

Availability of on-chain data may vary and may not be accessible for all crypto assets.

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