One of the major criticisms which digital assets face has to do with their speculative nature which makes it difficult to determine the true value of a coin. This is made more difficult by the variety and differences of technological setups in each cryptocurrency.
Crypto markets operators and the industry’s analysts have developed a range of metrics which are used to keep track of the value of altcoins. These metrics are used to determine how a crypto asset’s price will develop over time.
On-chain activity is one of the metrics which is used to assign a market value to a cryptocurrency. This metric looks at all the transaction activity around a cryptocurrency’s network. Transfers of funds, payments, and exchanges between wallets are all considered under on-chain activity. The basic concept behind the use of this metric is that if a crypto network has high activity, there is a lot of interest in it and therefore, it has the potential to grow further. The growth of the network makes it more valuable than the next network which has limited activity.
Altcoin on chain activity
Using the on chain activity to assess the altcoins available on the market currently, analysts have pointed out that Chainlink is one of the most active altcoins at the moment. The digital asset is fairly new on the markets but it has attracted a lot of attention with online crypto trading participants scrambling to get their piece of the crypto asset.
Across the general altcoin field, on-chain activity has dropped over the last few months. Uncertainty stemming from positions taken by regulators across the world has pushed investors towards investing in Bitcoin which is considered as a safe haven crypto asset. Despite the general lack of interest in altcoins, Chainlink is going against the grain, and it has seen rising activity in its network activity over the last few weeks.
Looking into #onchain network activity can be a good way to select assets to invest in during the bull market 🎯— Josh Rager 📈 (@Josh_Rager) August 13, 2019
e.g. $LINK has shown significant growth in transfers w/ each passing month. Useful metric to see increasing token interest & usage @glassnodehttps://t.co/17WnXS3ZMp pic.twitter.com/8F52iOyh6W
The high network activity experienced on Chainlink’s network has influenced the altcoin’s growth. The activity sets in motion a cycle which increase the token’s popularity among crypto traders and the number of investors on Chainlink has grown with its popularity. The altcoin’s growth has been significant and steady, which encourages investors that Chainlink is stable unlike other altcoins, which surge too quickly and will later fall at a similar pace.
On chain activity and general crypto interest
Investors and analysts look at the on-chain activity of a token and use this to determine when it will be best to buy or sell a particular crypto asset. There are certain points at which interest in the crypto will peak and it will be unable to go past that particular point. Many traders use such analysis to sell tokens when interest in them is at its highest and will later buy them back when prices drop.
Keeping track of on chain activity gives a trader an advantage over other market participants as they are able to stay ahead of the curve. More traders should take this metric into consideration when they are looking at altcoins or major crypto assets to invest in.