English
Intro to On-Chain
Background Knowledge
Exchange Flows/Indicators
Miner Flows/Indicators
UTXO Data/Indicators
Market Data/Indicators
Network Indicators
Stablecoin Exchange Flows/Indicators
Fund data & Premium
Why Entity Matters
The concept of entity is a key point to understand on-chain data.
Finding out who owns bitcoin is crucial to the investment
There are certainly price drivers in the market and market status can be affected depending on the status of such drivers in the market. For example, if a Bitcoin miner sends their BTC to the exchange market and sells them, it would drive the prices down considerably. Like the case of a miners' sell, it is obvious that if someone with a big bag sells, the price will likely drop. Thus, it is important to track and watch certain holders' behavior and find out who are the major price drivers in the market.
The magnitude and different interests of major players
Main participants who determine the price
Amount
Retails selling bitcoin and entities with a huge amount of coins selling their bags can't be interpreted at the same level because of its impact on price.
Different Interests
Each entity has a unique feature that they could give investors regarding interpreting the market structure or movement. It is essential for investors to understand what they are and be aware of what points investors should always pay attention to according to the entities. For example, as for miners, managing cost/revenue and reserve would be the priority while an investor with a huge amount of digital assets focuses on keeping their reserve and trying to accumulate more assets.
Thus, from an investment perspective, major participants in blockchain can be classified into three types: exchange, miner, and whale.
Entity Type 1: Exchange
Exchange is where the actual trading events occur, which reflects the demand side.
The market price is formed as a result of trading activities, where the price is consensus in the market. The metrics based on exchange entities such as inflow or outflow can be a big sign of major trading activities which can be a risk handler for smart traders. We define an exchange in our metrics as all participants in the exchange including users (traders).
Entity Type 2: Miner
Miner controls supply on the blockchain by mining blocks.
If mining pools shut down their mining activities for some reason, the network cannot be maintained. As mining pools make profits as much as they can, normally there is a timing gap between mining and monetization. By observing their behaviors via metrics such as miner outflows, traders can find unique signals to make profits. We define a miner in our metrics as all participants in the mining pool including individual miners.
Miners are OG whales. They periodically send a certain amount of BTC to exchanges, but if they decided to sell more coins, their outflow is likely to be changed significantly.
Entity Type 3: Whale
It makes and exploits market inefficiency by controlling both demand and supply.
A whale makes and exploits market inefficiency by controlling both demand and supply. Whales are traditionally important entities even in stock markets since they have the power to swing and move markets. Exploiting their patterns with CQ's metrics would be helpful to avoid risks.
To exploit market inefficiency caused by the entities as a trader, we need to see their behaviors. Flow data is CryptoQuant's unique data that summarizes their behaviors. Compared to network data, flow data is more granular (micro) data that can explain detailed activities that occurred on the blockchain. By understanding how the entities behave in the blockchain, we may build unique trading strategies against normal traders. We briefly describe each type of entity on why those types are important in the following sections.
Last modified 1mo ago