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If you trade crypto assets, you are familiar that this market is highly volatile and unpredictable. Therefore, there are many methods for analyzing the market that can help you minimize risk and maximize profit on your trading decisions.

Analyzing the markets

There are three main types of analysis that can be used on the market including on chain analysis, fundamental analysis , and technical analysis .

Understanding these three important methods of analysis is key to minimizing risk on your trades and will help you navigate the market on your way to successful trading.

On-chain Analysis

The on-chain analysis is the most common and simplest of the three methods. It is done by examining on-chain data such as transaction volume, difficulty, and blocks mined per day on bitcoin’s blockchain.

“On chain analytics” refers to the data that is recorded on the blockchain and what that data says about market sentiment. This information can be used by investors and traders, as well as bitcoin miners and those who use bitcoin on a daily basis. On chain analysis (OCA) is important because it gives an unbiased glimpse into the real world economy.

You find out answers to really important questions like:

  • how much on-chain volume is there on bitcoin?
  • how many transactions are on the bitcoin blockchain per day?
On-chain vs. fundamental vs. technical analysis 1

By analyzing on-chain data, you can determine if there is increased usage on the network which would likely increase the value of bitcoin over time. This information is crucial for traders who want to invest in bitcoin long term . With this analysis, traders may choose to do nothing or to place buy orders on bitcoin.

Check out the Bitcoin on-chain data at Glassnode

On chain analysis has its limitations. For example, some on-chain analysis on the bitcoin blockchain do not take into account smart contracts and on chain applications . Additionally, on – chain data does not take into account off-chain transactions which may give a more complete picture of activity on the network.

We can really construct promising views into this free market if we have a perfect recall of every deal, trade, and timestamp. To do on-chain analysis, you don’t need to be an expert in data science or computer programming; all you need is a basic knowledge of the fundamentals of a crypto network and how participants are interacting with it.

Fundamental Analysis

Along with on-chain analysis, fundamental analysis can also be done on crypto assets such as bitcoin and ethereum. Fundamental analysis is based on understanding the strength and weaknesses of underlying economic drivers like supply and demand factors.

The focus on this type of anaylsis is different from that of on-chain analysis because it looks at all non technical factors that could impact price movement in either direction.

See our crypto fundamental analysis checklist

It takes into consideration social and economic events on the economic stage on which crypto assets operate on. For example, if there is country with capital controls on bitcoin and ethereum, this type of event could drive up the value on both these coins on international markets.

The types of analysis done on fundamental analysis include:

  • the number of transactions on a given day to estimate how much people are using bitcoin on that day or week.
  • the price on bitcoin on a given day to estimate how much people are willing to pay for that particular amount of on bitcoin on that day.

In order to gain an edge when trading on fundamental analysis, you need a strong understanding on all the factors in play in the cryptocurrency markets. This means keeping tabs on changes in regulations and government policy .

Fundamental analysis is important for investors who are more focused on short term gains as opposed to long term investments that on-chain analysis would be suited for.

Fundamental types of trades would involve buying and selling on exchanges more frequently. These traders may be more inclined to use technical analysis on their trading pursuits.

Technical Analysis

This is the most complex of the three types of analysis on this list and when done right, it can generate impressive results for traders. The goal when using technical analysis is to determine what price a crypto asset will go up or go down in the future.

Technical analysts analyze price patterns in order to predict when prices will rise or fall. They also take into account things like volume on exchanges and on-chain data on a crypto asset.

The best platform for in-depth market analysis of a wide variety of assets in our opinion is TradingView

On-chain vs. fundamental vs. technical analysis 2

The results of technical analysis is an estimate on the price at which a crypto asset will be trading in the future. It does not indicate whether it is going to go up or down.

In addition, there are two common forms of technical analysis:


Classical form relies on looking for patterns on charts with tools such as trendlines , Fibonacci retracement, and Bollinger Bands.

The principle of technical analysis can give us an idea about what might happen in future based on what has happened in the past using chart patterns with indicators on current events.

For example, if we have a breakout from a trend line by going upwards on the day after a downwards breakout coming from a downward trend on the day before, it could indicate that on the next day prices on the cryptocurrency may go upwards.


The other form of technical analysis is called algorithmic trading which relies on machines to determine when an asset will increase in price on a given time frame. This means technical analysts are not involved with making trades on exchanges but rather, algorithms do it on their behalf.

Algorithmic traders rely on advanced tools like MATLAB or R to analyze market data and then use this information to create models that can predict future movements in prices on cryptocurrencies.

For example, if there has been news on bitcoin coming out about Bithump having compromised security systems, technical analysts would take into consideration how this might affect value going forwards by looking at previous negative events on exchanges on the market.

Final thoughts

You can be a successful trader just mastering one of these techniques but the real power and leverage to profit comes when you maximize your knowledge in all three fields of analysis. 

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CryptoWhat was created in 2015 and has become one of the most trusted and well-respected sources of information on all things crypto. The blog's authors are dedicated to providing clear, concise, and jargon-free explanations of this complex technology, so that everyone can understand it.