Institutions Say Most On-Chain Metrics Are Noise

Charles Edwards, founder of Capriole Investments, warned that up to 99% of on-chain metrics add little useful information. He said investors need to know which signals matter and how each metric is built before using it in trading or risk decisions.

Julio Moreno, head of research at CryptoQuant, described a change in institutional behavior: large desks now verify on-chain figures against traditional market data and exchange records. Moreno noted: “Now they don’t take the data just as face value but they want to really contrast that with their traditional data.”

A core problem is that a metric label can conceal different calculations. Edwards pointed out that providers may use the same name while applying distinct methods and data sources. He warned: “People will call a metric something but then the question is how is it calculated in the back end and that’s up to the platform.”

The disagreement over methods was visible during the FTX collapse in November 2022. CryptoQuant’s exchange reserves data showed FTX holding about 20,177 BTC on Nov. 6 and about 0.64 BTC by Nov. 8, indicating reserves drained before the market price dropped. Other dashboards showed larger FTX balances at the same time because they used more aggressive address clustering or different grouping rules.

Edwards said the volume of available metrics creates a high signal-to-noise ratio, and his firm limits inputs to a smaller, tested set of signals. Capriole’s Macro Index combines more than 60 on-chain, macro and equities metrics into a single oscillator the firm uses to inform positioning.

Institutional buyers now request methodological documentation from vendors, compare on-chain measures with custodial and exchange records and add standard market risk controls to crypto desks. Providers that disclose clear calculation methods and data sources face closer scrutiny from large investors.