On-chain analysis
Every transaction is public forever. That makes a kind of analysis possible here that exists nowhere else in finance — and makes privacy much weaker than people assume.
In conventional markets, positions are disclosed quarterly, in aggregate, with a lag. Here, every transaction is visible to everyone the moment it confirms, permanently. That is a genuinely unusual dataset.
What can be observed
- Every balance, and how long each has been unmoved.
- Flows into and out of known exchange addresses.
- The size distribution of holdings across addresses.
- Transaction counts, fees paid, and network activity over any period.
- Every position, collateral ratio and liquidation threshold in public lending protocols.
Common metrics, and what they are worth
- Exchange flows. Coins moving to exchanges are sometimes read as selling pressure. Directionally reasonable, and confounded by exchanges reorganising their own wallets constantly.
- Dormancy. Long-unmoved coins beginning to move is read as long-term holders selling. A real signal with a real ambiguity: moving is not selling, and custody migrations look identical.
- Realised value. Values each coin at the price when it last moved, rather than the current price. A genuinely clever construction and among the more useful ideas in this area.
- Active addresses. Treated as a user count. Addresses are free and one person can have thousands, so it is a weak proxy presented as a strong one.
You can know precisely how many coins moved. You cannot know why, or by whom, or whether it represents a change in anyone's intentions. On-chain analysis is a large supply of high-quality measurements attached to a small supply of reliable inference, and the gap between the two is filled by narrative. Read it as evidence, never as a signal.
The privacy side
Addresses carry no name, and everything else about them is public forever. Once an address is linked to an identity — through an exchange account with identity verification, a public donation address, or a purchase — the entire history of that address and everything connected to it becomes attributable retrospectively. Nothing can be undone later, because the record is permanent.
How addresses get linked
- Common input ownership. Spending several UTXOs in one transaction proves one party controls all of them. The foundational heuristic.
- Change identification. Distinguishing the change output from the payment, which links a new address back to the sender.
- Exchange records. Deposit and withdrawal addresses tie chain activity to verified identities, and those records are subject to legal process.
- Timing and amount correlation across chains and services.
Firms specialising in this work supply tools to exchanges and law enforcement, and the techniques have been effective in major investigations — see Silk Road.
The practical implication
If you buy on an identity-verified exchange and withdraw to a personal wallet, that wallet is linked to you in records that exist indefinitely. This is not a reason to avoid it. It is a reason to stop believing the widespread claim that these systems are anonymous — they are the most comprehensively surveilled financial records ever created, and their permanence means analysis improves with time while your past does not change.