BIS Study Finds Bitcoin Transfer Estimates Can Vary by 6x

Researchers at the Bank for International Settlements (BIS) found that estimates of Bitcoin (BTC) on-chain transfer values can differ by as much as a factor of six depending on the measurement method used. The finding, published in a BIS working paper, concerns on-chain transfer values rather than exchange trading volume, and stems from differences in how various methodologies handle Bitcoin’s transaction structure.

The core issue lies in how change outputs are treated. When a user spends Bitcoin, unspent funds are typically returned to the sender as change, which some measurement approaches count as an additional output even though no transfer to another party has taken place. Whether that return amount is included or excluded in a given metric accounts for much of the sixfold gap the researchers identified.

Metrics Obscure Economic Reality

The researchers were direct in their assessment of widely used crypto indicators. “Metrics such as transaction volumes, market capitalization and total value locked often suggest a degree of accuracy that is not supported by the nature of the underlying data,” they wrote. The study was based on an analysis of 100 billion blockchain records spanning Bitcoin, Ethereum (ETH) and Tron (TRX).

The measurement problem extends beyond transfer values to Bitcoin’s market capitalization. The researchers found that the conventional market cap measure has at times run as much as four times higher than realized capitalization, as it values each coin at the price at which it last moved on-chain rather than its current market price.

Ethereum presented a separate layer of complexity due to the volume of smart contracts on the network. Of roughly 67.5 million active contracts examined in the study, around 54 million could not be categorized using the classification framework the researchers applied. That left a substantial portion of Ethereum’s on-chain activity without a clear functional label.

Related Article: UK FCA Eyes Bespoke Rules and Fund Exemption for Tokenized Gold

Stablecoin Activity Differs by Blockchain

Stablecoins introduced another dimension to the measurement problem, as the same asset can serve different economic purposes depending on which blockchain it runs on. The researchers found that USDT on Ethereum was more closely tied to decentralized finance activity, while USDT on Tron was associated more with payment-like behavior and store-of-value use.

The divergence was particularly visible in smart contract holdings. The share of USDT held by smart contracts on Ethereum exceeded 20% in 2022, compared with roughly 1% on Tron. The researchers said aggregating USDT activity across both blockchains risks conflating fundamentally different types of economic behavior and can obscure how the stablecoin is actually being used in practice.

Some analytics providers have already moved to address this problem independently. Visa’s Onchain Analytics dashboard, powered by data from Allium Labs, displays both total and adjusted stablecoin transaction volumes, with the adjusted figure designed to strip out distortions from high-frequency trading, bots, bridge routing, and internal exchange operations. Over the past 30 days, the dashboard showed $6.4 trillion in total stablecoin transaction volume across tracked networks, against $313.1 billion in adjusted volume.

The BIS researchers concluded that on-chain indicators should be treated as “noisy approximations rather than direct measures of economic activity,” a characterization that applies across the Bitcoin, Ethereum, and stablecoin metrics examined in the study.

This article contains links to third-party websites or other content for information purposes only (“Third-Party Sites”). The Third-Party Sites are not under the control of CoinMarketCap, and CoinMarketCap is not responsible for the content of any Third-Party Site, including without limitation any link contained in a Third-Party Site, or any changes or updates to a Third-Party Site. CoinMarketCap is providing these links to you only as a convenience, and the inclusion of any link does not imply endorsement, approval or recommendation by CoinMarketCap of the site or any association with its operators. This article is intended to be used and must be used for informational purposes only. It is important to do your own research and analysis before making any material decisions related to any of the products or services described. This article is not intended as, and shall not be construed as, financial advice. The views and opinions expressed in this article are the author’s [company’s] own and do not necessarily reflect those of CoinMarketCap.

Source: coinmarketcap.com