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Analysis is common across all sectors, including traditional finance, but crypto analysts have unique data to work with.
While price prediction is a key part of on-chain analysis, people will also use on-chain data to assess economic risks, such as whether a whale holds a large portion of a token’s liquidity or technical risks like exposure to a hack.
On-chain sleuths also use on-chain analysis to catch scammers, fraudsters, and other bad actors—ZachXBT is a popular example of this.
Interested in joining the ranks of industry’s soothsayers? Here’s what you need to know.
Blockchain knowledge and tools
The most obvious skill you need is knowing blockchain technology like the back of your hand.
"There's quite specific knowledge that you need to progress [in analysis]," Vincent Maliepaard, marketing director at blockchain analytics company IntoTheBlock, told Decrypt. "You need to know the details. Like, if you're going to compare transactions with transactions—it doesn't quite work like that. They're different protocols with different purposes. You need to understand those nuances."
You need to understand what it means when gas fees increase, or what an increase in transactions could mean. Technical blockchain knowledge is an important foundation for this role.
Just like a graphic designer must know Photoshop, on-chain analysts must be well-versed with their tools.
"I think most needs can be fulfilled with four basic tools," Maliepaard said. "Anything that can ingest price on a daily basis and compare different coin prices, a block explorer, advanced intelligence tools such as IntoTheBlock, [and] social tools like Telegram or Discord as they’re usually the first platforms to be updated if something happens in a project."
Which intelligence tools you choose to rely on is up to you.
Tools like Artemis, TokenTerminal, and DefiLlama also provide a high-level overview of protocol metrics, letting you see broad trends within the blockchain ecosystem.
On the other hand, Dune and Flipside dive deeper into data, to help you understand why changes are occurring. Elsewhere, tools like Arkham and Nansen specialize in monitoring wallet activities.
Despite all of these advanced tools, block explorers remain the most important piece of equipment in the analyst’s toolbox. Understanding how to read a block explorer isn't a nice to have; it’s a requirement to be an on-chain analyst.
Finding a conclusion
As a result of the wide range of data you'll be consuming, being highly technical with a strong grasp of financial mathematics and ratios is the next requirement.
Having this skill creates room for nuanced analysis through the use of formulas and mathematical theory. For example, an on-chain analyst could project how a cryptocurrency's supply might evolve over time using linear extrapolation techniques—a type of mathematical estimation.
"A lot of on-chain analysis really has to do with following the trail of different transactions," independent on-chain analyst Patrick Scott told Decrypt. "[You need] to have the patience and attention to detail to see the research through to its natural end."
Anyone who has attempted to track on-chain transactions will know that the soft skills of attention to detail, perseverance, and curiosity are key to success. Tracking a long string of transactions can be hard labor but it's a crucial part of the job.
Once an on-chain analyst has gathered the information they need via their intense blockchain knowledge, high technical ability, and soft skills, it's time to come up with a thesis.
"I like to think about on-chain analysts in terms of the scientific method: you start with a hypothesis and test the heck out of it using data," Nirmal Krishnan, Head of Engineering at Artemis.xyz, told Decrypt. "You’ll find data that quickly disproves your hypothesis and go back to the drawing board with a new one. This process is iterative—you guess and then test until you arrive at data that supports your hypothesis."
Get your on-chain gig on
When starting out, you’ll want to build a portfolio of work that proves you're fit for the job.
"Get comfortable with tracking wallets and on-chain movements," a spokesperson for Nansen told Decrypt. "Actively sharing your findings and analysis on X [formerly Twitter] can help build your profile."
You'll start to create a name for yourself and you'll have a portfolio of correct predictions, risk assessments, or on-chain investigations to show off.
Next, you have two options: Get a full-time job for a company or monetize being an independent on-chain analyst.
"We work with a recruiting agency. Your best bet is making sure you have the knowledge and making sure that it makes sense for a recruiting agency to contact you for this position," Maliepaard explained. "Write some pieces on something related and put it on your LinkedIn so if recruiters visit they say, 'Oh this guy must know his stuff.’"
At the time of writing, there are 75 jobs available on Cryptocurrencyjobs.co with the keyword “analyst.”
Unfortunately, getting a job in the industry isn't always so easy—so you may have to stay independent. Or, you might just want to live the freelance lifestyle—free of the shackles of a 9 to 5.
How to be a freelance analyst
OKHotshot is an independent on-chain analyst and was named "one of the premier NFT analysts and security experts" by DappRadar. Prior to being an on-chain analyst, he was a day trader—but once he brought on-chain analysis into his day-to-day he saw a "night and day difference" in his profits and losses.
"As an on-chain analyst, I use this data in custom models to forecast possible market scenarios and position myself accordingly," OKHotshot told Decrypt. "I lead with on-chain data and it has been very lucrative."
Meanwhile, independent on-chain analyst Patrick Scott started out by creating educational content about on-chain analysis, on the side of his full-time job in corporate finance. He slowly began building an audience before he took the leap to go full-time as a freelance on-chain analyst.
While trading is his main form of income, he also offers his services as an on-chain analyst to help devise strategies and assess on-chain risk. In exchange for these services, he'll take a share of a project’s tokens.
"I advise a project called Clip Finance that provides single-click, automated yield vaults," Scott explained. "These vaults include a basket of strategies and I help them to find strategies that meet their risk profile, have suitable liquidity, and are diversified."
OKHotshot provides a similar service to NFT projects to approach him, including XCOPY, to help position themselves in the market.
"The work I do differs widely per project," OKHotshot explained. "Think: creating launch strategies, pricing and incentive models based on on-chain data and trends, along with smart contract auditing and Web3 security."
Getting your first clients is always the hardest part. F
or Scott, he connected directly with founders on X just to discuss the markets which later led to one or two bringing him on as an advisor. After the first few clients, things became easier as he built a track record.
Does on-chain analysis sound up your street? Familiarize yourself with block explorers, intelligence tools, and mathematical formulas. Start making predictions and finding security holes.
Build your reputation in the scene and one day you too could be part of crypto's army of soothsayers.