On-chain data to determine market trend

Introduction:

On-chain data is the most efficient and sophisticated way to interpret the sentiments of the market. It helps in collating all the information on a certain blockchain network. This only holds true for public blockchains though, we are not including privacy coins here.

As a trader, if you can read basic On-chain charts and metrics, it will be a huge move in your crypto trading journey and make you successful in gauging the sentiments of the markets.

Always remember, keeping institutions aside, the crypto market is usually a PvP (Player vs Player) market, so either you use someone as an exit liquidity during a downtrend or you are used by someone as liquidity. So always be one step ahead in the game.

Top 5 On-chain metrics to checkout:

1. NET UNREALIZED PROFIT/LOSS (NUPL)

This data will show you how much profit or losses are unrealised on the Bitcoin blockchain. The below chart clearly states the colour graphs and tags them in the different phases of the market sentiment, ranging from Capitulation to Euphoria (two extreme sides)

Always remember, once the NUPL enters the Belief (green) or Euphoria (blue) stage, there is always a correction seen after that.

2. Stablecoin Supply Ratio (SSR) Oscillator

One of the most straightforward metrics out-of-all is the SSR Oscillator. This tells us whether investors are sidelined and holding large portions of stable coins (USDT/USDC) ready to buy crypto soon.

It’s the ammunition waiting to go all-in when the situation is absolutely favourable. The lower the graph falls, the more stable coins waiting to buy crypto. In simpler terms, just consider this as a SUPPLY:DEMAND mechanism between BTC:USDT

3. Realized HODL Ratio

This metric is a little advanced in nature, because it shows the relation between coins bought recently (1 week) and old coins (1–2 years). This is represented by what is known as HODL bands.

In crypto terms, let’s say this metric shows us when dumb money is buying into an upward moving market and smart money accumulates when there is weakness in the market. A clear indicator, when dumb money is buying a lot, it’s time to book-profit. Reason why so many retail investors got stuck at 2017 ATH.

4. MVRV Z-score

This metric shows the ratio between Market Cap and Realised Cap. The Realised Cap shows how much money was used to purchase Bitcoin. Whenever the Market Cap of Bitcoin outpaces the Realized Cap figure, it indicates the market is overextended and might be due for a correction.

In the below chart, MVRV Z score below the black line indicates a very strong market weakness.

5. 90D Coin Days Destroyed

Another very simple metric to follow, it shows investors who were holding BTC for a specifically larger time-frame are now starting to sell. Once this starts happening, they destroy what is referred as COIN DAYS DESTROYED (CDD).

Again, once this activity starts, it’s a clear indicator that there is a shift in the sentiment of investors and maybe a trend change is on the way in the overall market.

#CoinDCXpathbreaker

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Mohnish Isaac Kariappa

Mohnish Isaac Kariappa

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I make use of advanced Technical Tools and On-Chain Data to make crypto easy to understand for everyone in the crypto community. #CoinDCXpathbreaker