Nansen and Bitget Research Analyze On-Chain Metrics for Crypto Token Prices
Nansen and Bitget Research recently released a report that delves into on-chain metrics as predictors of crypto token prices. The key findings of the report suggest that on-chain activity, specifically total value locked (TVL) and fees in Ethereum (ETH), serve as better indicators of short-term price movements compared to social sentiment.
The report highlights significant correlations between governance tokens and chain metrics within the Ethereum ecosystem and other networks. Statistical tests conducted in the study revealed that TVL in ETH and fees in ETH form the most effective model for predicting contemporary changes in governance prices.
The study examined various on-chain metrics across 12 blockchains, including Arbitrum, Base, Celo, Linea, Polygon, Optimism, Avalanche, Binance Smart Chain (BSC), Fantom, Ronin, Solana, and Tron.
Research Analyst Aurelie Barthere from Nansen stated, “Our collaboration with Bitget aims to evaluate tokens from multiple perspectives. Bitget focuses on aspects such as community strength, security, and innovation, while our joint efforts have led to the discovery of over 100 new tokens since April through products like PoolX and Premarket.”
When it comes to predicting price returns a week in advance, both TVL in ETH and fees in ETH emerged as significant factors. The study found that higher fees and TVL are associated with higher subsequent returns.
The study also utilized Fama-MacBeth regressions to estimate the risk premia linked to token price returns, a widely used metric in financial analysis to gauge risk premia tied to equity market returns.
Analysts emphasized, “When predicting price returns one week ahead, ‘TVL in ETH’ and ‘Fees in ETH’ serve as significant risk premiums in a one-factor model. Both metrics exhibit positive risk premia, indicating that higher fees and TVL are correlated with higher subsequent returns.”
The results of the study were more pronounced when examining chains individually rather than aggregating Ethereum and layer-2 (L2) chains.