Key facts
- Onchain Bitcoin transfer values can vary by as much as sixfold based on measurement methods.
- Conventional crypto metrics like transaction volumes and market capitalization can obscure economic activity.
- Ethereum's smart contract proliferation and stablecoins' cross-chain use cases present additional measurement challenges.
- Visa's adjusted stablecoin transaction volume is significantly lower than its total volume, removing distortions from high-frequency trading and bot activity.
Researchers at the Bank for International Settlements (BIS) have identified significant discrepancies in how onchain cryptocurrency data is measured, potentially obscuring the true economic activity within the crypto ecosystem. A study by the BIS found that estimates of Bitcoin onchain transfer values can vary by as much as sixfold, depending on the measurement methodology employed.
The primary driver of this discrepancy lies in Bitcoin's transaction structure, where unspent funds returned as change to the sender can be miscounted as a separate transfer to another party. This issue affects metrics such as transaction volumes and market capitalization, with the conventional market cap measure at times being four times higher than the realized capitalization, which accounts for when a coin last moved.
The BIS study, which analyzed 100 billion blockchain records across Bitcoin, Ethereum, and Tron, concluded that these measurement challenges are not unique to Bitcoin and extend across the broader crypto landscape. Ethereum presents additional complexities due to the vast number of smart contracts, many of which could not be categorized by the study's classifications. Stablecoin activity also poses interpretation difficulties, as the same asset can serve different functions on different blockchains. For instance, USDT on Ethereum showed a higher linkage to decentralized finance (DeFi) activity, while on Tron, it was more associated with payment and store-of-value purposes, with USDT held by smart contracts on Ethereum exceeding 20% in 2022 compared to around 1% on Tron.
The researchers suggest that onchain indicators should be viewed as "noisy approximations" rather than precise measures of economic activity. Some analytics providers, like Visa, are already attempting to address these issues by distinguishing between raw blockchain activity and adjusted measures that aim to remove distortions from high-frequency trading, bots, and internal exchange operations. Visa's Onchain Analytics dashboard, for example, shows a total stablecoin transaction volume of $6.4 trillion over the past 30 days, compared to an adjusted volume of $313.1 billion.