BIS warning: Bitcoin's on-chain data is 6 times biased, and the market capitalization is 4 times inflated

According to Woofun AI, the Bank for International Settlements (BIS) latest research points to fundamental measurement biases in cryptocurrency core indicators, indicating that estimates of transfer amounts on the Bitcoin chain may differ by up to six times. This discovery does not target the volume of transactions within the exchange, but rather focuses on the statistical logic of the underlying data of the blockchain, revealing a serious lack of accuracy in the on-chain data currently widely quoted in the market.

This huge data divide is mainly due to the limitations of Bitcoin's unique transaction structure and statistical methods. When a user initiates a transaction, unused funds are usually returned to the sender's address in the form of “zeroing”. Although ownership of the funds has not actually been transferred, they are counted as another output in the on-chain records, causing the transaction volume to be seriously overestimated. The researchers emphasized that the accuracy of indicators such as transaction volume, market value, and locked total value is simply not supported by the characteristics of the underlying data.

More importantly, the market value calculation is also distorted. Traditional algorithms value the currency based on the price at the time of the last transaction, which sometimes causes the calculation results to be as much as four times higher than the actual market value.

According to data compiled by Woofun AI, analysis based on 100 billion blockchain records on Bitcoin, Ethereum, and Tron (Tron) shows that such measurement challenges are pervasive across the ecosystem. Ethereum faces unique challenges due to the surge in smart contracts. Out of around 67.5 million active contracts, up to 54 million cannot be classified by existing classification standards. The functional differentiation of stablecoins further exacerbates statistical complexity: USDT on Ethereum is mainly linked to DeFi activities, while USDT on the wave market is mostly used for payments or value storage. According to 2022 data, the share of USDT held by Ethereum smart contracts is over 20%, and the wave field is only about 1%. If the two are simply summed up, it is very easy to confuse different types of economic activity.

Since on-chain metrics should be viewed as 'error-bound approximations rather than direct measures of economic activity', industry bodies are working to correct the data noise. The V.US (V.US) on-chain analysis dashboard, supported by data from Allium Labs, shows the actual adjusted transaction volume by eliminating disruptive factors such as high-frequency transactions, robot operations, cross-chain bridges, and internal exchange operations. According to the data, in the past 30 days, the total stablecoin transaction volume in the monitoring network was $6.4 trillion, while the adjusted effective transaction volume was only $313.1 billion. The disparity between the two highlights the need for denoising.