Researchers at the Bank for International Settlements identified substantial discrepancies in how cryptocurrency activity is measured, with Bitcoin onchain transfer value estimates varying by as much as sixfold depending on the methodology used.
The measurement problem stems largely from Bitcoin's transaction structure. When users spend Bitcoin, unspent funds are typically returned to the sender as change, which can be counted as an additional output even though it does not represent a transfer to another party. These differing approaches to categorizing change outputs and other transfers back to the sender account for the significant variation in estimates.
The researchers noted that standard metrics such as transaction volumes, market capitalization, and total value locked often suggest accuracy that is not supported by the underlying data structure. Bitcoin's market capitalization measurement presented a related challenge, with conventional measures at times being as much as four times higher than realized capitalization, which values each coin at the price when it last moved.
Broader Measurement Challenges Across Blockchains
The BIS study analyzed 100 billion blockchain records across Bitcoin, Ethereum, and Tron, finding that similar measurement challenges extend across the broader cryptocurrency ecosystem.
Ethereum presented a separate measurement difficulty due to the proliferation of smart contracts. Of roughly 67.5 million active contracts examined, approximately 54 million could not be categorized using the classifications applied in the study.
Stablecoin Activity Variations
Interpreting stablecoin activity presented additional complexity, as the same asset can serve different purposes across blockchains. USDT on Ethereum was more closely linked to decentralized finance activity, while USDT on Tron was associated more with payment-like and store-of-value purposes.
The differences were particularly pronounced in smart contract holdings. The share of USDT held by smart contracts on Ethereum exceeded 20 percent in 2022, compared with around 1 percent on Tron. Because of these different use cases, the researchers noted that aggregating USDT activity across blockchains can conflate different types of economic activity and obscure how stablecoins are actually being used.
The BIS researchers concluded that onchain indicators should be treated as noisy approximations rather than direct measures of economic activity.
Industry Adjustments to Raw Data
Some analytics providers have already begun distinguishing between raw blockchain activity and adjusted measures intended to better represent actual economic activity. Visa's Onchain Analytics dashboard, powered by data from Allium Labs, displays both total and adjusted stablecoin transaction volumes. Visa's adjusted methodology aims to remove potential distortions from high-frequency trading, bots, bridge routing, and internal exchange operations.
