BIS paper finds major gap in Bitcoin onchain transfer estimates

Researchers at the Bank for International Settlements found that estimates of Bitcoin onchain transfer values can vary by as much as sixfold depending on how transactions are measured.

The finding concerns onchain Bitcoin transfer values, rather than trading volume on crypto exchanges. The sixfold gap reflects differences between measurement methods, including how change outputs and other transfers back to the sender are treated.

The discrepancy stems largely from Bitcoin’s transaction structure. When users spend Bitcoin, unspent funds are often returned to the sender as change, which can be counted as another output even though it does not represent funds being transferred to another party.

Breakdown of blockchain records analyzed in the BIS study. Source: BIS

“Metrics such as transaction volumes, market capitalisation and total value locked often suggest a degree of accuracy that is not supported by the nature of the underlying data,” the researchers wrote.

The measurement problem also extends to Bitcoin’s market capitalization. The researchers found that the conventional measure has at times been as much as four times higher than realized capitalization, which values each coin at the price when it last moved.