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DEFI

Mega DeFi Edition Part Three ⛓️ 

Welcome to day three of the Mega DeFi Edition of the Litepaper. 🫂 

You might not consider on-chain analytics/analysis as a part of the DeFi space, but it most definitely is.

Some people might say on-chain analysis is DeFi adjacent – but it’s not. It’s the backbone that helps users, protocols, and investors navigate decentralized systems with clarity, confidence, and efficiency.

Without it, you’re effectively blind. 💡 

ON-CHAIN ANALYSIS
On-Chain Analytics: The Ultimate Equalizer for Retail Investors 💪 

Wall Street has its fancy Bloomberg terminals and a bottomless pit of quarterly earnings reports. Meanwhile, crypto folks? We lean on on-chain analytics. It’s not another overhyped tech gimmick. It’s a window into the raw data fueling this entire market. And yes, it changes everything.

Bridging the Gap: Traditional Finance vs. On-Chain 🌉 

Stock market traders rely on price-to-earnings ratios, SEC filings, and an alphabet soup of signals. Retail investors usually get stuck squinting at 10-Ks while big institutions feast on high-powered data feeds. Crypto flips the script. Thanks to blockchain’s radical transparency, anyone can see who’s moving what, when they’re moving it, and (roughly) why.

The Power of Data Without Gatekeepers 🚪 

Here’s the kicker: you don’t need a Wall Street-sized budget to access this information. Tools like Glassnode, Nansen, and Dune Analytics democratize access to insights that were once walled off for the elite. On-chain data gives retail traders a fighting chance, whether it’s identifying whale activity, tracking stablecoin flows, or following NFTs’ boom-and-bust cycles.

ON-CHAIN ANALYSIS
On-Chain Analytics: Your DeFi Crystal Ball 🔮

Some folks still believe DeFi is all hype and unicorn memes. However, for the individual trail trader and investor, on-chain analytics is the bedrock of this entire decentralized circus. 🪨 

You want to identify rug pulls? Check the chain. Chasing those sweet APYs? Check the chain. Trying not to get wrecked when a DAO vote flips a protocol’s parameters overnight? You guessed it—check the chain. Here’s how these tools fit into DeFi and why you might want to pay attention.

Radical Transparency

Grayscale BTC ETF Wallet Monitoring from Arkham Intelligence – Click to enlarge.

DeFi wouldn’t exist without blockchain’s open nature. On-chain analytics amplifies that transparency. It breaks down every transaction, every wallet address, and every protocol. It’s like reading a star chart—but one that’s actually useful, especially when you’re about to throw money into a new yield farm that popped up overnight.

Real-Time Reaction

Liquidity can disappear faster than you can say “slippage.” On-chain analytics lets you keep tabs on real-time liquidity flows, token movements, and usage across DEXs, lending platforms, and yield farms. Don’t wait for tomorrow’s headlines. By then, you’re either too late or too liquidated.

Rug Pull Radar

Let’s face it: DeFi has been a goldmine for scammers. Rug pulls happen when big liquidity providers yank the floor out from under a token or protocol. On-chain analytics flags suspicious spikes in withdrawals, outsized token dumps, and other anomalies, giving you some early “uh-oh” signals before your beloved moonshot coin hits zero.

Wallet Behavior: Whales, Noobs, and Surprise Movements

Some addresses hibernate like bears, then wake up to dump tokens at 3 a.m. Others buy every dip like they’re allergic to fiat. On-chain analytics helps you track these behaviors. Catching the big players’ moves early can mean the difference between doubling your stack and watching it evaporate.

Market Sentiment in Action

DeFi sentiment swings can be wild. On-chain data lets you see if volumes are surging, pools are filling, or if everyone’s stampeding away. It’s a bit like reading the room at a party—one glance tells you if people are having fun or eyeing the exits.

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AUTOMATED MARKET MAKERS
The Closest Things To A Cheat Code You’ll Get

On-chain analysis has expanded beyond identifying and monitoring wallets and transactions in the early days. The data available to the individual retail trader and investor now is staggering. And while there are a metric crap ton of tools, some analysts consider some of the tools to be exceptionally more powerful than others.

1. MVRV (Market-Value-to-Realized-Value)

BTC 7-Day MVRV Ratio from Santiment – Click to enlarge.

What It Does: Lights the path for oversold or overbought mania. Low MVRV might mean bargains galore; high MVRV spells potential hot-air territory.

• Where To Get It: Glassnode, Santiment, CryptoQuant, Coin Metrics

2. SOPR (Spent Output Profit Ratio)

ETH Daily SOPR from CryptoQuant – Click to enlarge.

• What It Does: Reads profit-taking vs. capitulation. If holders are throwing in the towel, it shows up here. If they’re cashing out like it’s 2017, you’ll see that, too.

• Where To Get It: Glassnode, CryptoQuant

3. Exchange Net Flows

ETH Exchange Net Flows from IntoTheBlock – Click to enlarge.

• What It Does: Gauges the push and pull of funds on exchanges. Think of big inflows as a bull waiting to be sacrificed. Heavy outflows? Psst…somebody’s stocking up.

• Where To Get It: CryptoQuant, Nansen, Glassnode, Kaiko

4. Dormancy Flow

BTC Domrancy Flow from GlassNode – Click to enlarge

• What It Does: Blends coin age and transfer value to find capitulation or accumulation sweet spots. Handy for bottom-fishers who swear they’re not gamblers.

• Where To Get It: Glassnode, CryptoQuant

5. HODL Waves

HODL Waves – Source: GlassNode – Click to enlarge.

• What It Does: Exposes how long coins have been sitting still. If everything’s dust-covered, diamond hands are at work. If those old coins start moving, brace for volatility.

• Where To Get It: Glassnode

6. Whale Wallet Movement

On Chain Wallet Activity from Arkham Intelligence – Click to enlarge.

• What It Does: Tracks the giant fish in the pond. If whales are hoarding, that’s usually good. If they’re unloading, you might want to duck.

• Where To Get It: Nansen, Santiment, Glassnode, Arkham Intelligence

7. Fees-to-Revenue Ratio

Fee Ratio Multiple from BitBo – Click to enlarge.

• What It Does: Measures demand for block space. A high ratio can mean a gold rush (meme-coins, NFTs, or other questionable mania). Low ratio? The party’s a bit quiet.

• Where To Get It: BitBo, CryptoQuant, Coin Metrics

8. Puell Multiple

BTC Puell Multiple from CryptoQuant – Click to enlarge.

• What It Does: Peeks into miner profitability. When miners start to sweat—or start popping champagne—it can mark major tops or bottoms.

• Where To Get It: LookIntoBitcoin, Glassnode

9. Bitcoin Days Destroyed (BDD)

Bitcoin Days Destroyed from BGeometrics – Click to enlarge.

• What It Does: Tracks movement of dormant coins. If ancient BTC starts roaming, pay attention—it might be a harbinger of major trends.

• Where To Get It: BGeometrics, Coin Metrics

Pro Tip #1

Metrics play better together. Combining SOPR, Exchange Net Flows, and Reserve Risk can paint a clearer picture than any single one alone.

Pro Tip #2

Glassnode and Santiment’s paid plans typically unlock the juiciest data. For a serious edge, pair Nansen’s wallet-level intel with Glassnode’s macro views.

ON-CHAIN ANALYSIS
10 Free On-Chain Analysis Platform

1. Glassnode Studio (Freemium)

• What it does: Offers a massive range of on-chain metrics for Bitcoin, Ethereum, and other top assets.

• Free features: Basic metrics like exchange balances, active addresses, and supply breakdowns.

2. Dune Analytics

• What it does: Community-driven dashboards for custom blockchain data queries.

• Free features: Access to public dashboards and the ability to create your own SQL-based queries.

3. CryptoQuant

• What it does: Focuses on exchange flows, miner activity, and market indicators.

• Free features: High-level insights like exchange inflows/outflows and miner wallet activities.

4. Nansen Lite

• What it does: Tracks wallet activity and token flows to show what the “smart money” is doing.

• Free features: Wallet labels, transaction flows, and token movements.

5. IntoTheBlock

• What it does: Breaks down on-chain data into easy-to-understand signals.

• Free features: Basic signals like large transactions, inflows, and holders’ concentration.

6. DeFiLlama

• What it does: Tracks total value locked (TVL) across DeFi protocols and chains.

• Free features: Everything. This tool doesn’t believe in paywalls.

7. Etherscan

• What it does: Ethereum’s top blockchain explorer for transactions, tokens, and contracts.

• Free features: All data is free, but it’s up to you to make sense of it.

8. Token Terminal

• What it does: Displays financial metrics for crypto projects, like revenue and price-to-earnings ratios.

• Free features: Basic financials for major chains and dApps.

9. Messari (Free Tier)

• What it does: Offers a broad overview of market trends and project insights.

• Free features: Daily news updates, project profiles, and limited access to research.

10. Santiment (Free Tier)

• What it does: Provides insights into social trends, development activity, and on-chain metrics.

• Free features: Some on-chain data and basic social metrics for select assets.

These tools can give you enough ammo to sound like an on-chain savant without splurging. If you’re serious about analysis but allergic to subscriptions, combining a few of these will cover your bases. 🔄 

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