BIS: On-Chain Metrics for Cryptocurrencies Are Not Always Reliable

International Settlement Bank (BIS) researchers have found that estimates of Bitcoin's on-chain transaction volume can differ by as much as sixfold based on measurement methods. The BIS analyzed 1 billion blockchain records from Bitcoin, Ethereum, and Tron blockchains.

The core issue lies in Bitcoin's transaction structure. When users send coins, leftover amounts often return to the sender as change, which gets recorded separately on the blockchain. This can lead to double-counting of funds that haven't actually moved between different parties.

Bitcoin market capitalization calculations also showed discrepancies. Traditional market cap methods sometimes show values up to four times higher than realized market cap, which uses the price at the time of last movement rather than applying current prices uniformly across all coins.

The problem extends beyond Bitcoin. Ethereum's smart contract ecosystem made activity classification difficult; out of approximately 67.5 million active smart contracts studied, about 54 million couldn't be classified under the research framework. Stablecoins also present challenges: USDT on Ethereum is closely tied to DeFi activities while on Tron it serves more as a payment and store of value.

For example, in 2022, smart contract-held USDT accounted for over 20% of total supply on Ethereum but only about 1% on Tron. BIS researchers concluded that on-chain metrics should be treated as approximations rather than direct measures of economic activity.