BIS Study Exposes Flawed Crypto Market Metrics
A new study by the Bank for International Settlements (BIS) has revealed that crypto market metrics may be off by as much as six times. The BIS, often referred to as the central bank of central banks, published a working paper with De Nederlandsche Bank titled 'Hidden by complexity? Measuring stablecoin, crypto and decentralised finance ecosystems.' The study built on 100 billion blockchain records across Bitcoin, Ethereum, and Tron.
The researchers found that estimates of Bitcoin's on-chain transfer values can vary depending on how the transactions are measured. A single transaction can send funds to a recipient while returning unused funds as change, making it difficult to determine the actual economic transfer value. This results in vastly different transfer-volume estimates, with some methods showing numbers six times higher than others.
The measurement problem extends beyond Bitcoin to other cryptocurrencies and stablecoins. For example, Ethereum's 67.5 million active deployed contracts make measuring its real economic activity even harder. Stablecoin activity varies by chain and purpose, making it difficult to aggregate across networks.
Regulators should take note that the metrics used to assess systemic risk and evaluate DeFi protocols may be noisy approximations rather than precise measures. The study calls for more cautious use of crypto metrics, urging that on-chain indicators be treated as approximate economic activity rather than precise measures.