Coin Metrics' State of the Network: Issue 21

Tuesday, October 15, 2019

Weekly Feature

BTC Is Close to $1B of All-time Fees, But Fee Growth is Slowing

BTC is close to eclipsing $1 billion of cumulative, all-time transaction fees. As of October 13th, there have been $996,458,718 worth of fees paid on the BTC network.

Coincidentally, BTC is also close to reaching another milestone: $15 billion worth of all-time miner revenue (also known as “thermocap”). “Miner revenue” includes block rewards (i.e. newly issued tokens) and transaction fees, both of which are typically paid to miners. 

However, since early 2018, BTC fees have been accounting for less and less of cumulative miner revenue. On January 31st, 2018, BTC fees accounted for about 12% of the total miner revenue (block rewards account for the remaining 88%). As of October 13th, 2019, BTC’s cumulative fees were only 6.6% of total miner revenue. This means that since February 2018, BTC cumulative fees have not been growing as fast as cumulative block rewards. 

BTC median fees shot up to nearly $34 in late 2017, compared to a peak of only about $3 for ETH. BTC median fees have since fallen and have remained at less than $4 since February, 2018. This extreme difference in median fees is one of the main reasons for the decline in cumulative fees’ share of total miner revenue. 

Comparatively, as of October 13th, cumulative fees make up about 3.6% of ETH’s cumulative miner revenue. But, compared to BTC, the ratio has stayed relatively flat since the start of 2018. 

This is mostly due to the fact that ETH’s fees have grown much faster than BTC’s over the period. BTC’s cumulative fees have grown about 74% since January 1st 2018, while ETH’s have grown close to 400%.

BTC and ETH’s market cap to thermocap ratios (“thermocap” is another term for cumulative miner revenue) also flipped in early 2018. The market cap to thermocap ratio can potentially serve as a (rough) proxy of a crypto asset’s valuation to revenue, where the market cap represents an approximate valuation and thermocap represents the total revenue generated by the network. As of October 13th, BTC’s market cap to thermocap ratio is 10.3 compared to 3.2 for ETH. Interestingly, the S&P price to sales ratio is currently about 2.18.

Network Data Insights

Summary Metrics

Market cap was up for all five major crypto assets over the past week. For the fifth week in a row, ETH’s market cap outperformed BTC’s. ETH’s market cap was up 4.6% for the week (and was up 1% last week), while BTC’s market cap grew by 2% (compared to a 3.1% loss last week). 

Hash rate, however, grew more for BTC than ETH. BTC’s approximate hash rate was up 3.5% over the last week while ETH’s dropped by 0.5%. This is the second week in a row that BTC’s hash rate has outgrown ETH’s hash rate. 

Network Highlights

The combined total adjusted transfer value of the seven stablecoins we track (DAI, GUSD, PAX, USDC, TUSD, USDT, and USDT_ETH) approached all-time highs at the end of September, hitting $1,546,234,810 on September 24th. However, the total has since dropped, averaging about $618,000,000 a day over the first 13 days of October. The below chart shows the seven day moving average of the combined total.

A majority of the total stablecoin adjusted transfer value comes from Tether, which is still the biggest stablecoin by most measures. The activity on Tether continues to shift from USDT (which is the original, OMNI based version) to USDT_ETH (which is the newer, Ethereum based version of Tether). 

Market Data Insights

Over the past month, most major assets experienced sharp declines. Bitcoin is down 20 percent over this time period driven primarily by a concentrated movement from $10,000 to $8,000 on September 24. Notice the stair step-like pattern for Bitcoin prices reflecting long periods of muted price volatility interspersed with short periods of large and concentrated price movement. 

Ethereum is flat over this time period but significantly outperformed Bitcoin, perhaps because of an emerging recognition that demand for Ethereum's block space represented by fees is growing (and momentarily eclipsed Bitcoin's daily fees). Both XRP and Stellar have experienced modest single-digit gains for this month. Most other major assets are down, but less than Bitcoin. 

Notably, there was no significant impact on prices despite major developments in crypto markets over the past week -- a class action lawsuit was filed against Tether and Bitfinex, the SEC formally rejected Bitwise's ETF and filed an emergency action against Telegram's token offering, and multiple members of Libra Association dropped out due to regulatory pressure. 

The fact that prices for smaller assets remained resilient (relative to Bitcoin) in the face of these developments suggests that increased regulatory scrutiny has already been priced into the market. 

Coin Metrics Updates

This week’s updates from the Coin Metrics team:

  • Coin Metrics is hiring! We recently opened up 7 new roles, including Blockchain Data Engineer and Data Quality and Operations Lead. Please check out our Careers page to view the openings.

  • The CM Bletchley Index (CMBI) Insights section will return next week.

As always, if you have any feedback or requests, don’t hesitate to reach out at

Subscribe and Past Issues

Coin Metrics’ State of the Network, is an unbiased, weekly view of the crypto market informed by our own network (on-chain) and market data.

If you'd like to get State of the Network in your inbox, please subscribe here. You can see previous issues of State of the Network here.

Check out the Coin Metrics Blog for more in depth research and analysis.

Coin Metrics' State of the Network: Issue 20

Tuesday, October 8th, 2019

Weekly Feature

Tezos Market Cap Bounced Back in 2019, But Still Has Little Usage

After a controversial start, Tezos (XTZ) has bounced back in 2019. Since the start of 2019, XTZ’s market cap has grown almost in lock step by BTC’s. As of October 6th, XTZ’s market cap has grown by 119%, while BTC’s has grown by 112%.

XTZ’s realized market capitalization grew over the course of 2019. Realized capitalization  is a metric created by Coin Metrics that is calculated by valuing each unit of supply at the price it last moved. This is in contrast to traditional market cap which values each coin uniformly at the current market price. Realized cap can be thought of as a measure of the average cost basis of asset holders (cost basis is basically the total amount originally invested). Check out State of the Network Issue 14 for a more detailed explanation of realized cap. 

XTZ’s realized cap has grown by over 10% since the beginning of 2019, while BTC’s grew by over 28%. ETH, ADA, DCR, and ZEC’s realized caps have all declined over the course of 2019. 

Even though XTZ’s market cap has been growing, its network activity has not been growing at a similar rate. The below chart shows XTZ’s daily active addresses. We define “active addresses” as the unique number of addresses that either sent or received a ledger change over the course of a day. Users may own multiple addresses, so active addresses serves as the upper bound for potential amount of daily unique users on a network. 

Over the last 30 days, XTZ has had an average of 4,803 active addresses, compared to 286,467 and 709,569 daily active addresses for ETH and BTC, respectively.

Additionally, the following chart shows XTZ’s daily transaction count and daily transfer count. We define a “transfer” as any transaction that moves some units of XTZ between two addresses. “Transactions” include all types of ledger amending actions, including contract calls and other non-monetary operations. 

XTZ’s transaction count is significantly higher than its transfer count, which signifies that a majority of Tezos operations are non-monetary. This ratio differs from blockchain to blockchain; over the last 30 days, ETH has about 2.3x as many transactions as transfers, while BTC has had over 2.15x transfers as transactions. 

Digging deeper, the below chart shows XTZ’s transaction count broken down by operation type. A majority of XTZ transactions are endorsements. Endorsements are part of the Tezos baking process, and occur every time a block is baked. Tezos also has a significant amount of account activations, delegations, originations, and reveals, which are all part of the Tezos baking and account creation processes. 

Filtering out endorsements, account activations, delegations, originations, and reveals, we are left with all other transactions, which can be seen as the “transaction” line in the below chart (which uses a log scale). 

Over 95% of the remaining transactions are transfers (i.e. 95% of the remaining transactions that are not endorsements, account activations, delegations, originations, or reveals are transfers). This means that there are only a small amount of other types of non-monetary XTZ transactions, such as non-monetary contract calls. 

In fact, XTZ has a small number of contracts overall. As of October 6th, XTZ only has 108 contracts that contain code. This compares to over 11,000,000 contracts with code on Ethereum.

Although Tezos’ market cap has been showing signs of growth, it still has a long way to go in terms of gaining real adoption.

Network Data Insights

Summary Metrics

BTC’s market cap and realized cap continued to slide over the past week, dropping by 3.1% and 0.4%, respectively. ETH’s market cap, on the other hand, grew a little over the last week, with a 1% growth in market cap and 0.7% growth in realized cap. ETH’s active addresses also surged upwards, growing by over 15.5%.

Adjusted transfer value for both BTC and ETH also dropped significantly over the past week, both down by over 28%. LTC and BCH’s adjusted transfer value also had a bad week, each dropping by over 47%. XRP, however, escaped the onslaught. XRP’s adjusted transfer value grew by 22.5% week over week. 

Network Highlights

ETH continues to challenge BTC for the daily transaction fees throne. ETH daily fees briefly passed BTC daily fees on both September 28th and 29th, by a margin of about $20,000 on both occasions. However BTC has once again taken the lead since then. On October 6th, BTC had over $128,000 daily fees, compared to a little over $66,000 for ETH.

BTC’s total fees (i.e. all-time cumulative fees) are approaching $1,000,000,000. As of October 6th, BTC has $990,237,685 of total fees. BTC’s total fees should pass the billion dollar milestone on approximately October 14th. Coincidentally, BTC all-time miner revenue (which includes fees and block rewards) should reach $15 billion around approximately the same time, give or take a day or two.

Market Data Insights

Tether on Ethereum Almost Exceeding Tether on Omni 

The long-term trend of Tether supply shifting from the Omni protocol to a ERC-20 token on the Ethereum blockchain continues. Coin Metrics has previously written about the current state of stablecoins and Tether supply

Although Tether has not publicly disclosed why they are swapping supply issued on Omni to Ethereum, market forces indicate that this trend should continue. Possible explanations include a concerted effort to diversify away from a single, largely unmaintained protocol in Omni and taking advantage of the robust wallet, tools, and infrastructure supporting ERC-20 tokens. As Tether is primarily used for active traders engaged in arbitrage, transacting Tether through Ethereum brings many advantages, including faster time to first confirmation, faster exchange withdrawal and deposit times, and lower fees. On the margin, increased issuance of Tether on Ethereum should be supportive of higher transaction counts and fees, while reducing these figures on Bitcoin. 

The current Tether supply is 4.1 billion units, consisting of 2.15 billion on Omni and 1.96 billion on Ethereum. There are also minuscule amounts of Tether issued on other blockchains, including 0.14 billion on Tron and 0.005 billion on EOS. The latest significant change in supply occurred on September 16 when the Tether Treasury burned 400 million units on Omni and issued the same amount on Ethereum with a short lag. Over the past several days, small amounts of Tether have been printed on Ethereum. 

Declines in Tether Supply Provide More Observations to Study Relationship with Bitcoin Price

Although the specific mechanism behind why additional Tether is printed is unknown, several explanations have been put forth. One set of explanations, advocated by representatives of Tether, is that Tether will occasionally print Tether to fulfill future purchase obligations by traders. Tether is printed in large batches purely as a means of convenience. Another set of explanations are conspiratorial in nature and suggest that Tether and its affiliated entities may engage in price manipulation. The lack of transparency drives these explanations. 

Regardless of which explanation is closest to the truth, both sets of explanations could suggest a relationship between Tether printing and future price movements. There is also a second order effect in that this narrative is widely known and followed, to the extent that this belief could drive trader behavior and make this relationship self-fulfilling. 

Recent changes in Tether supply provide more observations to study this relationship. In August, the Tether Treasury burned 300 million Tether on Omni, resulting in only the second time in history that Tether supply has decreased. Below we plot the one-month change in Bitcoin’s price in blue with the one-month change Tether supply in red. Recent price movements have revealed that Bitcoin price declined following the decline in Tether supply (with a short lag) as it did during a similar situation in late 2018. 

The relationship between Tether supply and Bitcoin price deserves continued study. Promising areas of research include analysis of the exact timing of transactions between the Tether Treasury and exchanges, controlling for Tether supply that remains in the Tether Treasury or is otherwise quarantined, and exploring the relationship at different lags. Despite the increased regulatory scrutiny and the mounting lawsuits against Tether, it still remains a critically important element in crypto markets and its systemic importance continues to grow. The market share of Tether trading volume has recently reached nearly 75 percent on Binance and shows long-term growth. 

CM Bletchley Indexes (CMBI) Insights

After last week's less than impressive market performance (~20% fall), mid and small cap assets rebounded the most, returning over 4% for the week as Bitcoin continued to dip (2.5%) and Ether closed flat.

At the end of the third quarter it is amazing to look at the distribution of returns across all assets over 2019. For a market that spent the majority of 2018 highly correlated on both the up side and the down side, the significant differences in return profiles (as viewed below) puts into perspective the strength displayed by large cap assets.

With Bitcoin being one of the top performers, it’s strength can further be demonstrated by looking at the returns of Bletchley Indexes in BTC terms. Interestingly, as we have reported over much of September and late August, mid cap and small cap assets have shown some recent resilience which can be seen below too.

Coin Metrics Updates

This week’s updates from the Coin Metrics team:

  • Coin Metrics is hiring! We recently opened up 7 new roles, including Blockchain Data Engineer and Data Quality and Operations Lead. Please check out our Careers page to view the openings.

As always, if you have any feedback or requests, don’t hesitate to reach out at

Subscribe and Past Issues

Coin Metrics’ State of the Network, is an unbiased, weekly view of the crypto market informed by our own network (on-chain) and market data.

If you'd like to get State of the Network in your inbox, please subscribe here. You can see previous issues of State of the Network here.

Check out the Coin Metrics Blog for more in depth research and analysis.

Coin Metrics' State of the Network: Issue 19

Tuesday, October 1, 2019

A double header this week: This week’s issue has two weekly features. The first is about the recent market sell-off, and the second is about the recent BTC hash rate dip.

Weekly Feature # 1

Belief in Bull Market Remains Unchanged Despite Large Market Sell-Off

Crypto markets were hit hard last week. Bitcoin experienced the largest single-day decline in price in 2019 and reached lows not seen since mid-June. All major assets are down roughly 20 percent or more with no clear catalyst. 

Analysis of on-chain activity indicates that selling pressure during the market sell-off came primarily from short-term traders that last acquired Bitcoin at prices between $10,000 and $12,000. Comparisons to previous market cycles indicate that drawdowns of this magnitude are rare but to be expected. Although several narratives have been proposed as to the cause of this market sell-off, the mean-reverting nature of volatility combined with the increased use of derivatives appear to be the primary factor. 

Selling Pressure Originated from Short-Term Traders that Acquired Bitcoin at Prices Between $10,000 and $12,000 

Coin Metrics has previously introduced realized capitalization as an alternative to market capitalization. Instead of valuing each coin at the current market price (as market capitalization does), realized capitalization values each coin at the price of the last on-chain movement (e.g. if a coin was last moved in 2017 when BTC price was for $2,500, that particular coin would be priced at $2,500 instead of the current market price). This gives a more realistic measure of the economic significance of a crypto asset. Realized cap can be thought of as a measure of the average cost basis of Bitcoin holders (cost basis is basically the total amount originally invested).

Although we commonly use realized capitalization as a summary metric, an analysis of its composition reveals important information about the psychology of current owners. Here we present the current state of Bitcoin’s UTXO set, represented by the number of Bitcoin that last moved at a given price. For instance, approximately 4 million Bitcoin last moved when prices were between $0 and $500. And there are 1.2 million Bitcoin that last moved near the current price of $8,065. 

Assuming that the price of the last on-chain movement is the cost basis of each Bitcoin, 63% of Bitcoin now have unrealized gains while 37 percent have unrealized losses. Most of the Bitcoin holders are unequally distributed at prices between $0 and $13,000. There are few Bitcoin with a cost basis above $13,000 as these holders have long since capitulated at lower prices and the remaining have likely converted into long-term, jaded holders. 

Here we show the change in the number of Bitcoin in each cost basis bin between September 20, 2019 (the day before the start of the sell-off when Bitcoin was at $10,000) and today. An analysis of the change between the two dates reveals important insights into the psychology of various Bitcoin trader profiles. 

One cohort of traders are owners with a cost basis above $13,000. Prior to the market sell-off, roughly 720,000 Bitcoin belonged to this cohort. Analysis of on-chain activity indicates that virtually all Bitcoin owned by this cohort remained dormant during the sell-off, suggesting that capitulation among these traders is complete. Only 4,140 of the 720,000 Bitcoin moved over the past nine days and did not contribute meaningfully to selling pressure. These traders have apparently become numb to a 20 percent drop in prices and are now firmly long-term holders. 

Another cohort of traders are owners that acquired Bitcoin at prices between $10,000 and $13,000. This cohort represent fresh capital that recently bought in during the minor euphoria over the summer when prices reached new highs of this market cycle. Analysis of on-chain activity indicates that the majority of the selling pressure came from this cohort of traders and suggest that these short-term holders were protecting their positions by taking a moderate loss. A particularly large rotation was observed from the $10,000 cost basis bin to the $8,000 cost basis bin over the past nine days -- roughly 500,000 Bitcoin with a cost basis of $10,000 was sold over the past nine days and the $8,000 cost basis bin increased by 750,000 Bitcoin. 

Finally, we have a third cohort of traders that acquired Bitcoin at prices below $8,000. These owners represent long-term holders with a strong long-term conviction in Bitcoin. Approximately 11.46 million Bitcoin belong to this cohort. Despite the extreme market movement, these holders have remained resolute in their market views -- only 150,000 of the 11.46 million Bitcoin were seen to have moved on-chain. Profit taking or panic selling was limited among these holders. This behavior indicates that for the majority of Bitcoin holders, the market view of Bitcoin being in a bull market remains unchanged. 

Previous market cycles indicate that drawdowns of a magnitude similar to what we have observed since the market peaked early this summer are rare but not unprecedented. During the run-up to the 2017 bubble, Bitcoin price corrected by nearly 40 percent from peak in two circumstances, once in July 2017 and another in September 2017. If the $13,000 level is assumed to be a local peak, the current drawdown is also nearly 40 percent -- the edge of historical norms. 

Given the activity seen from the current cohorts of traders, belief in Bitcoin’s bull market remains unchanged -- although this narrative could be challenged if price continues to decline or we start to see on-chain evidence of panic selling from long-term holders. 

Mean-Reverting Nature of Volatility and Use of Derivatives Likely the Cause of Large Market Movement

The market environment immediately prior to last week were gradually building towards the conditions necessary for a large market movement. For roughly two months, Bitcoin traded within a short price range of between $9,500 to $11,000 causing short-term measures of realized volatility to drop to historical lows. Measured on a one-month rolling basis, annualized volatility of Bitcoin’s price reached 44 percent, well below its historical average and bringing it inline with the volatilities of traditional financial assets. Since the beginning of 2017, volatility has only been this low or lower only 3.5 percent of the time. 

Here we can separate one-month rolling volatility into two distinct regimes, one prior to January 2017 and one after. Prior to January 2017, volatility tended to be low and stay low. After January 2017, which coincides with the start of the modern volatility era in which derivatives now have outsized impact, the lower bound of volatility is elevated and reverts rapidly when it reaches low levels. 

Low periods of volatility are typically followed by high periods of volatility because under an environment of low volatility, traders extrapolate this state to the future and take on more risk in the form of borrowing or the use of leveraged instruments. As prices begin to move, margin calls and forced liquidations tend to reinforce the direction of the initial move, exaggerating the magnitude of the move and normalizing the level of volatility. According to an analysis by Skew, forced liquidations of long positions on BitMEX’s XBTUSD contract alone totaled roughly $700 million over the past week causing the basis relative to spot markets to momentarily reach negative 3 percent. The same phenomenon works in reverse -- when volatility is high, risk taking is reduced, eliminating this feedback loop. Thus, volatility exhibits mean-reverting behavior.

Combined with this, there is a broader trend of increased use of derivatives such that certain exchanges such as BitMEX and CME are now critical trading venues where much of the price discovery takes place. BitMEX in particular regularly has notional trading volumes up to one magnitude higher than the largest spot exchanges. New platforms like Binance and FTX have also recently launched and have attracted meaningful volume. 

These trends indicate that the phenomenon of large, concentrated price movements should continue. It also suggests that modeling volatility, the prices at which leverage is applied and how much leverage is applied, along with their implied liquidation prices, are critical to understanding and predicting price movements. 

Market Microstructure Remains Underdeveloped 

A close analysis of trading activity on a selection of major Bitcoin-U.S. Dollar and Bitcoin-Tether markets was conducted. Although there are some questionable trades, such as two sells of 100 Bitcoin each on Bitfinex’s market immediately prior to the large decline in prices, there were no clear signs of market manipulation in this case (unlike previous incidents in which constituent markets for BitMEX’s Bitcoin index were specifically targeted). Major markets traded with a close spread immediately prior and during the decline. Immediately after the decline, however, several spot markets started to trade with a large spread between each other. Coinbase, in particular, traded as high as $9,000 afterwards when other markets were around $8,300. It is unknown why such a large spread was observed for a sustained period of time.  

Tether markets also show some questionable trades, with elevated trading activity from HitBTC’s and LBank’s markets, but the quality and reliability of their reported trading data is low. Tether markets experienced lows of nearly $7,500, nearly $500 lower than the lows reached in Bitcoin-U.S. Dollar markets. Binance’s market, perhaps the largest and most efficient market in this set, reached a low of $7,800 during this time. 

These irregularities show that the current state of crypto’s market microstructure remains underdeveloped. Under times of market stress, Tether’s peg with the U.S. Dollar can break, large spreads can still exist between major markets, exchange trading systems and matching engines can become unstable, and arbitrageurs and market makers can do a better job at rapidly identifying arbitrage opportunities and transporting liquidity across exchanges. 

Until the quality of price discovery can be improved upon, regulators will still likely have unresolved questions regarding the susceptibility of crypto markets to manipulation, and approval of any crypto-related ETFs are unlikely to be approved. 

Weekly Feature #2

An Investigation Into The Recent BTC Hash Rate Dip

On the 24th of September, the east coast of the US woke up to twitter erupting with a plethora of pundits commenting on BTC’s drop in hash rate on 23rd of September. On face value, the metric indicated that hash rate had come crashing down 32% from 98 to 67 exahashes per second. 

Needless to say the community scrambled to find a narrative for the drop in hashrate which included some of the following:

However, what lacked across many channels was discussion about the construction of the metric itself and the source of the data anomaly. It turns out that the way that hash rate is measured (or as we explain below, the way that hash rate is estimated) played a big role in the apparent hash rate drop. Below we discuss how data can help provide ground truths and insight into the health of a network such as Bitcoin.

What is Hash Rate and How is it Calculated?

Without connecting to all mining firms and mining pool operations directly it is impossible to determine the exact hash rate of the network. Thus, many data providers, including Coin Metrics, estimate the hash rate by looking at the mining difficulty on any given day and the number of blocks produced in that 24 hour period. 

To approximate hash rate, we use the following formula:

For example, BTC difficulty adjusts to target generation of 1 block every 10 minutes, which is equal to 144 blocks every 24 hours. However, there’s a degree of randomness involved in block production which means that it is impossible to predict exactly when the next block is mined, and therefore it is also impossible to predict the exact amount of blocks expected in a 24 hour period.

A Brief Refresher on Mining Randomness

Miners compete to find a random nonce that, when hashed with the remaining block data, produces a hash whose numerical value is lower than a protocol defined target (19 leading zeros for BTC). Implicitly, this process implies a high degree of randomness that should follow a Poisson distribution over time, thus PoW followers should expect variations in the timing of block production where the probability that a block does not arrive in x time period is:

Hash Rate “Drop” on the 23rd of September

Understanding the randomness of block generation, we can investigate what actually occurred that day. Here is the fact; 114 blocks were produced between the 22nd of September midnight UTC and the 23rd of September Midnight UTC, and the Bitcoin network expected there to be 144 produced (i.e. one block every 10 minutes). The probability of this happening is low (0.56%) but not out of the realm of possibility. 

This was largely due to 3 blocks that took over 50 minutes to be produced, whose impact can be seen by the 26 hour blip in the orange 144-block moving average line below. 

Additionally, yesterday (30 Sept) there was a Bitcoin block that took 119 minutes to produce (odds of this are 0.00068%)! This was followed by a block that took 52 seconds. Similarly this has lead to a decrease in implied hash rate, but the overall impact seems to have not been as drastic due to the distribution of other block production times throughout the day. 

Impact to Industry Hash Rate Calculations

As discussed above, hash rate can only be estimated by the rate at which blocks are produced. As such, hash rate values printed once daily with a 24 look back (the industry standard) fell noticeably given the slow block arrivals. These types of metrics can be misleading during probabilistically low events as demonstrated last week.

This principle applies more broadly to data and is commonly referred to as the ‘map’ versus ‘territory’ issue, where ‘the map of reality is not reality’. This applies to many of the daily crypto metrics that enthusiasts, traders and asset managers track - they are useful tools to provide insight but require knowledge of a metric’s weaknesses as well as strengths and where possible additional context to truly understand what is happening on the network (especially during the 0.56% occurrences). To this extent, Coin Metrics is striving to provide more context than just data through an end to end data solution that includes market data, network data, indexes, alternative data (twitter sentiment) and research. 

What Coin Metrics is Doing About This 

This was one of the primary motivations for Coin Metrics to create a suit of Real Time Network Data metrics. Real time data helps understand the health of a network and provides more data points to inform the market. Examples in relation to the hash rate drop recently include:

  • Real time network data analysis of block intervals (as shown above) would indicate that the determination of the backwards looking hash rate metric would print a decrease.

  • Rather than speculating on the cause of the drop in hash rate for the 24 hour period after the midnight UTC metric print, Coin Metrics was witnessing the recovery of implied hash rate throughout the day, surpassing 80 exahashes by midday EST. Further, as evidenced by the red lines below, it was coincidental that the previous end of the day print was at the daily high and the 67 exahash print was at the daily low.

CM Network Data Pro Real-Time Block-by-Block 12hr Implied Hash Rate and the 48hr Implied Hash Rate

As hash rate is sensitive to the randomness of block generation, these new metrics can act to improve the robustness of the current hash rate metrics used by the majority of the market.

As expected:

  • The 12hr implied hash rate is even more sensitive than the 24hr implied hash rate and can provide earlier indication that average block generation has reduced on the network.

  • The 48hr implied hash rate takes a bigger sample of data and is thus less sensitive to abnormally slow or high block production, providing a more robust view of hash rate by cutting out some noise.

In summary the ‘hash rate flash crash’ of last week deserved more context and investigation than it received. The cause of the perceived drop in hash rate itself can be explained by a reasonable and innocuous increase in the time to generate blocks (which is a random process) over a 24 hour period. Since determination of true hashrate cannot be done without connecting to every miner, the industry standard is to derive an implied hashrate using a 24 hour lookback window. However, as discussed above, this approach does have its limitations and through applying various time windows you can generate a more informed perspective of hash rate health.

At Coin Metrics we are striving to build the required tools to more accurately assess, monitor, predict and create actionable insights off of in our mission to educate the masses on the still nascent crypto asset market. Hopefully this leads to less speculation about events like this and more informed conversations across the industry.

Network Data Insights

Summary Metrics

After a strong run during mid-September, the major crypto networks were down this past week. All five of the largest assets lost over 13% of market cap week over week, with BTC and ETH down 16.4% and 15.5%, respectively. All five major assets also declined in terms of realized market cap, with BCH taking the biggest loss of 1.8%.

Fees and mining revenue are also down significantly. BTC and ETH daily fees are down 11% and 8.1%, respectively. Fees on XRP, LTC, and BCH fell even further, and are all down by over 25%. BTC still leads fees in total fees seven day average, but not by much. Over the past week, BTC had an average of $274,000 of daily fees, which ETH had an average of $233,700.

Network Highlights

ZCash recently passed the $1B cumulative miner revenue figure (this doesn’t take into account the founders reward). Only 5 assets are part of the >$1B cumulative miner revenue club. However, ZCash is the only asset in that club whose market cap and realized cap are both lower than its cumulative miner revenue.

ETH gas usage continues to hover near all-time highs. Over 61B gas (daily total) was used on both September 28th and September 29th.

CM Bletchley Indexes (CMBI) Insights

Having recently experienced the lowering of correlation across the market, this week we experienced a significant market wide move, leading all Bletchley Indexes to fall by ~20%. The market wide nature of the move can be seen when analysing the returns of indexes in terms of Bitcoin value, where we can see that the move relatively evenly impacted large cap, medium cap and small cap assets. 

Coin Metrics Updates

This week’s updates from the Coin Metrics team:

  • Coin Metrics is hiring! We recently opened up 7 new roles, including Blockchain Data Engineer and Data Quality and Operations Lead. Please check out our Careers page to view the openings.

As always, if you have any feedback or requests, don’t hesitate to reach out at

Subscribe and Past Issues

Coin Metrics’ State of the Network, is an unbiased, weekly view of the crypto market informed by our own network (on-chain) and market data.

If you'd like to get State of the Network in your inbox, please subscribe here. You can see previous issues of State of the Network here.

Check out the Coin Metrics Blog for more in depth research and analysis.

Coin Metrics' State of the Network: Issue 18

Tuesday, September 24, 2019

Weekly Feature

Stellar Airdrops Are Mostly Transferred to Exchanges or Unclaimed

On November 6th, 2018, announced it was creating the “largest crypto giveaway in history” in partnership with the Stellar Development Foundation (SDF). The plan was to distribute $125M of Stellar (XLM) among Blockchain’s 30M wallets. Users first needed to complete a KYC process in order to be eligible for the giveaway. Similarly, recently announced a plan to distribute at most 2B Lumens to its users.

Stellar is a crypto-asset created in 2014 whose development is overseen by the SDF. Over its history, the foundation created (or assisted) strategies to distribute Lumens (Stellar’s native token) to many users around the world. At the genesis of Stellar, 100B Lumens were created and granted to the SDF which over time distributed them. Currently, around 20B out of those 100B are outside of SDF control.

An “airdrop” is essentially a cryptocurrency giveaway that is commonly used as a way to distribute new tokens. The sender of the airdrop typically covers all associated transaction fees so there are no costs for the receivers. Airdrops serve as a way to bootstrap new currencies, because they allow the currency creators (or whoever is sponsoring the airdrop) to distribute the currency to a large amount of addresses in a short amount of time. They are often also described as a way to increase a currency’s decentralization, since tokens can be sent to many users who can then do whatever they want with them.

Since airdrop senders cover the fees, they do not even necessarily need the receiver’s permission to airdrop them tokens – the senders simply need a list of addresses that they would like to distribute to. However, this also means that the airdropped currency may never be claimed since some receiving addresses may be inactive or uninterested. 

Given our expertise in on-chain data analysis, Coin Metrics decided to analyze the Blockchain and Keybase airdrops and look at the distribution and activity after the initial transfers. Airdrop

Our analysis, supported by comments from the airdrop recipients, show that two addresses were used to airdrop XLM on’s users. First, GARAR5 was used from Nov 6th 2018 to Jan 9th 2019, then GDNWRV from Jan 9th 2019 onward. On July, 15th 2019, announced that the airdrop was over.

Between Nov 6th 2018 and July 15th 2019, those two accounts created 1.2M accounts and credited them with around 400M XLM (worth $27M at current prices, $100M at the announcement of the airdrop). When valuing the XLM at the time it was credited, we find that overall, airdrop claimants received $45.7M. 

As of Sept 23rd, only 804,309 of those accounts still held more than 1 XLM (minimum balance requirement) and held a combined 101M XLM. Only 8,465 accounts that received Stellar from during the airdrop period still own more than initial amount they received when they were created.

The vast majority of the airdropped XLM that was sent to users was then sent to various exchanges. This implies that many recipients of the airdrop sold their XLM in exchange for fiat or other cryptocurrencies. Airdrop

On September 9th, 2019, announced a “surprise gift” to its 300K users from the Stellar foundation in the form of a 100M XLM airdrop (worth $5M at the time). Furthermore, it was supposed to be the first of a series of airdrops to Keybase users, for a total of 2B XLM (roughly 2% of the total XLM supply) to be airdropped to Keybase users in monthly tranches over the next 20 months.

In order to analyze the airdrop, we first looked into how the XLM was distributed to users. It turns out that all the 100M XLM were pre-distributed to 274,864 accounts between Sept 9th and Sept 14th. This is visible when looking at the sharp increase in the number of XLM accounts owning between $10 and $100 (the airdropped amount was ~$20) during that period.

Looking deeper into the chain, we identified GDV4KE as the creator of all those accounts. Furthermore, this account was the biggest account creator by far during the airdrop period ruling out other accounts being used.

The initial balances of the accounts created by GDV4KE are consistent with the amounts received by Keybase airdrop beneficiaries and the number of accounts created is consistent with the number of users claimed by Keybase (280-300K).

Furthermore, we identified two distinct categories of accounts created for this airdrop:

  • A minority (8.8K) received 356.3817276 XLM

  • The majority (266K) received 356.2904939 XLM

The first batch was created on Sept 9th. The latter batch was created from Sept 10th to 14th. The difference in start dates probably explains the small difference in value given out to users.

Given that the airdropped amounts were pre-credited to users, we looked at the airdrop’s uptake among Keybase users to see if they were actually claiming their free tokens. We define an airdrop as “claimed” if the account created by Keybase/Stellar had any activity.

Given the low size of the first batch, its high claim rate and the fact that it was first, we assume it was a test batch given to active Keybase users.

So far, around 19M XLM ($1.3M at current prices) has been claimed out of the 100M XLM currently distributed and 2B maximum distributable. Compared to the airdrop, so far only a small fraction of the airdrop (around 1M XLM) has ended up on exchanges so far.


Airdrops have been touted as ways to improve an asset’s decentralization, popularity, or usage by fairly distributing some of its supply among individuals which can then use it as they see fit.

Our analysis shows that despite it being literally free money, only a minority of the targeted population actually claim their airdrop money (1.2M addresses out of 30-40M wallets for, around 20% of Keybase users).

Furthermore, most people decide to exchange this new money for another one (either fiat, a stablecoin or Bitcoin) and only a few of them keep using the cryptoasset by getting more of it on open markets or through other means. These findings call into question the efficacy of airdrops, as most of the coins are sold immediately

Network Data Insights

Summary Metrics

The major crypto assets rebounded this past week and had positive gains in most metrics.  ETH’s market cap grew by 15% week over week, leading all five of the major assets.

ETH’s daily transaction fees also continued to rise (as we covered in State of the Network Issue  17), growing by over 53%. BTC fees grew by 4.2% over the same period. Average BTC fees were still higher, however, than ETH fees over the last seven days.  BTC’s average daily fees were $307k over the past week, compared to $254k for ETH.

Network security for both BTC and ETH  also continues to grow stronger. BTC’s average difficulty and hash rate grew by 6.9% and 6.5%, respectively. Similarly, ETH’s difficulty and hash rate grew by 6.1% and 6.4%.

Network Highlights

After reaching all-time highs in gas usage last week, as we reported in State of the Network Issue 17, the ETH block gas limit has increased. On September 20th, the ETH block gas limit increased to a new high of 6.42B gas. 

But despite the block gas limit increase, blocks are still at historically high rates of utilization. As of September 22nd, ETH blocks were 93.86% full, which is relatively close to the all-time high of 96.90%.

This is because ETH gas usage continued to rise after the gas limit was increased. ETH gas usage hit new all-time highs this past week, reaching 60.1B gas used on September 20th.

Market Data Insights

The trend of smaller assets outperforming Bitcoin continued this past week. This phenomenon has been rarely observed since the market peaked starting in January 2018. Notable performers over the past week include Ethereum (+11%), XRP (+8%), and Stellar (+17%), while Bitcoin declined by 3%. The sustained and concentrated nature of these price increases, in combination with a growing narrative of healthier than expected on-chain metrics for Ethereum, has presented market participants with perhaps the first credible instance this year that altcoins may be back on the rise. 

Impact of Binance U.S. Trader Restriction Announcement Has Been Priced In But Restriction Still Not in Effect 

The general trend of Bitcoin outperformance this year is at least partially attributable to exchange operators delisting small, illiquid assets and restricting U.S. investors from trading in certain assets. Bittrex and Poloniex both took aggressive steps this year to restrict several assets from U.S. traders. Most other major exchanges which have already banned U.S. users in policy but allowed them to trade in practice have stepped up their KYC and geofencing measures and cracked down on users using means to circumvent their restrictions. 

Most notably, Binance announced in June of this year that all U.S. traders would be restricted from trading on their platform which coincides with the start of a period of extremely strong Bitcoin outperformance. As one of the only remaining trading venues available to U.S. traders and the primary trading venue for several altcoins, the announcement of this restriction served as a catalyst for some traders to liquidate their altcoin holdings into Bitcoin or Tether (the primary quote currencies for most markets on Binance). 

Trading volume supports this theory as Binance's volume has been declining sharply after achieving a local peak in June. According to Binance's updated terms of service, the ban of U.S. traders was supposed to go into effect on September 12, although several individuals have reported that this ban is not currently being enforced. 

Nonetheless, the impact of lowered demand for these smaller assets due to the heightened regulatory environment appear to be mostly priced in, and most traders who anticipated the September 12 deadline have already sold their positions. The reversal we have seen in these smaller assets' prices may just be a slight normalization in prices following a period of liquidations. Future trends in Bitcoin-altcoin price movements may depend on how the regulatory environment develops relative to current market expectations. 

CM Bletchley Indexes (CMBI) Insights

Is the elusive and ever evasive alt-season finally nearing? Weekly CMBI returns indicate that there is renewed interest in mid and small cap crypto assets, which produced weekly returns against BTC of 6% and 5% respectively. However, perhaps the best weekly performer was Ethereum, which lead the large cap assets, returning 14% against the US Dollar and 18% against BTC. 

Medium and small cap crypto assets still have a long way to go before any meaningful recovery takes place. However, as highlighted in last week’s SOTN (Issue 17), increased on-chain activity for Ethereum coupled with a few consecutive weeks of strong performance, such as the below, could indicate a change in investor sentiment.

Coin Metrics Updates

This week’s updates from the Coin Metrics team:

  • Coin Metrics is hiring! We recently opened up 7 new roles, including Blockchain Data Engineer and Data Quality and Operations Lead. Please check out our Careers page to view the openings.

As always, if you have any feedback or requests, don’t hesitate to reach out at

Subscribe and Past Issues

Coin Metrics’ State of the Network, is an unbiased, weekly view of the crypto market informed by our own network (on-chain) and market data.

If you'd like to get State of the Network in your inbox, please subscribe here. You can see previous issues of State of the Network here.

Check out the Coin Metrics Blog for more in depth research and analysis.

Coin Metrics' State of the Network: Issue 17

Tuesday, September 17, 2019

Weekly Feature

ETH is Overtaking BTC in Daily Transaction Fees, Driven by Tether

ETH is on the verge of overtaking BTC in daily transaction fees. As of September 15th, ETH had $182,899 daily transaction fees compared to $185,993 for BTC:

ETH has overtaken BTC’s daily transaction fees several times before over the course of 2019. The below chart shows the ratio of BTC daily fees to ETH’s daily fees (i.e. BTC Fees/ETH Fees), both in USD. 

If BTC’s fees are higher than ETH’s, the ratio is above 1, while if BTC’s fees are lower than ETH’s the ratio is below 1. For example, ETH’s daily transaction fees surpassed BTC’s daily fees on February 19th, 2019 and March 18th, 2019. This causes the BTC/ETH fees line to dip below 1 on both of those dates in the below chart. 

Thank you to Spencer Noon for tweeting about this and inspiring the following charts:

There has been debate in the past about whether highs fees are detrimental to a crypto network. But ultimately, transaction fees represent real network demand and usage. Importantly, high fees are critical to long term network security. When block rewards decrease over time, fees become a larger and larger percentage of total miner revenue. Total fees therefore are a strong signal of overall network health and long-term sustainability. 

The below chart shows BTC/ETH fees ratio from the beginning of 2018 onward (we omitted prior data because BTC fees were consistently at least 10-25x ETH’s before 2018). There were brief periods in 2018 when ETH had more daily transaction fees than BTC, but for the most part BTC has been on top. In fact, from early April to mid August 2019 BTC’s daily transaction fees surged ahead of ETH’s, mostly remaining 5-10x ETH’s over the four month stretch:

But over the last thirty days, BTC’s fees have come crashing down while ETH’s have shot up. There are probably many factors involved in this recent swing. However there is one big recent change that has likely played a major role in driving the latest fee reversal: Tether’s migration from the Bitcoin based Omni protocol to Ethereum.

Tether (USDT) was initially built on the Omni protocol, which is built on top of the Bitcoin blockchain. But Tether now also supports a version of their token on the Ethereum protocol (USDT-ETH). Over the course of 2019, Tether users has been migrating from the Omni version of Tether to the Ethereum version. Despite the change, Tether is still by far the most dominant stablecoin, as we covered in State of the Network Issue 15

USDT on OMNI was growing over most of the course of 2019. In fact, USDT transaction count even began hitting new all-time highs starting around April, 2019, peaking at 91,513 on August 7th. 

But since then, USDT-ETH has skyrocketed. The Ethereum version of Tether hit a new all-time high of 187,912 daily transactions on September 9th. USDT-ETH is generating so many transactions that it recently accounted for over 25% of all Ethereum transactions on September 8th, and has consistently accounted for more than 10% of all Ethereum transactions since mid August:

Similarly, USDT-ETH also recently vaulted past USDT (Omni) in daily adjusted transfer value after USDT (Omni)  reached transfer value all-time highs. The below chart shows adjusted transfer value smoothed using a seven day rolling average.

Addresses with balances of at least $10 show a similar pattern. The below chart shows the number of unique addresses holding at least $10 on USDT (Omni) and USDT-ETH. We typically use addresses with at least $10 to approximate users since it is small enough to potentially represent a retail investor (as opposed to an institution) but large enough to be a non-dust account (however this is only a proxy - in reality, many users have more than one address). The Ethereum version is now about even with the Omni version, after the Omni version surged to all-time highs, peaking in July.

Ethereum total daily gas also recently reached an all-time high, likely due to USDT-ETH’s recent surge. According to ETH Gas Station, Tether is the biggest gas spender out of all Ethereum contracts over the last 30 days. 

Lastly, the below chart shows ETH and BTC fees as a percentage of total miner revenue (i.e. fees + block rewards). ETH has started to climb ahead of BTC over the last 30 days.

All of this suggests that the recent ETH/BTC fee flip is likely being driven by the switch from USDT (Omni) to USDT-ETH. If this is the case, the fee flip could continue to grow moving forward as more users switch from over to the Ethereum version of the protocol. We will continue to monitor this and provide updates in future version of State of the Network.

Network Data Insights

Summary Metrics

Crypto networks were relatively stable over the last week, outside of a few metrics. As noted in this week’s weekly feature, BTC’s fees dropped by over 12% this past week, while ETH’s fees grew by 48.1%.  BTC and ETH’s hash rate and difficulty both increased, however, which is a positive signal for overall network security.

BCH, on the other hand, had a relatively volatile week. While adjusted transfer value grew by 18.4% week over week, BCH transaction count dropped by 23.6%. Similar to BTC, BCH’s fees dropped, while the hash rate and difficulty grew significantly.

Network Highlights

ZEC is approaching $1 billion cumulative mining revenue (aka thermocap). As of September 15th, ZEC has generated $994,842,737 of total mining revenue.

BCH supply recently surpassed 18,000,000. BCH passed the milestone on September 13th. Comparatively, BTC’s supply was 17,934,192 on September 13th. BCH is currently on pace to hit its next block reward halving sooner than BTC. BCH is expected to hit its next halving on April 8th, 2020, while BTC’s next halving is expected on May 15th, 2020.

Market Data Insights

Limited Response to Global Events from Bitcoin This Week

Earlier this year, the narrative that Bitcoin serves as a store-of-value and haven asset in times of increased geopolitical risk was supported by empirical data as both Bitcoin and gold (along with other traditional haven assets) rose in price. 

In theory, the intrinsic qualities of Bitcoin support this narrative -- under market environments in which geopolitical or financial instability is increasing (more than what’s priced in), the need for store-of-value assets that are immune from policy errors increase. Moreover, we should also expect to see an inverse relationship in Bitcoin’s price to changes in real yields. As nominal interest rates decline, the opportunity cost for holding a non-yield producing asset like Bitcoin declines. And as inflation rises, the need for wealth-preserving qualities of Bitcoin grows. 

The problem with this narrative is the inconsistent empirical data. This week, two significant events impacted major financial markets: the European Central Bank’s announcement of monetary policy easing by cutting a key interest rate and restarting its quantitative easing program, and an attack on one of Saudi Arabia’s key oil processing facilities which led to the largest sudden supply disruption in history. Despite major moves in certain financial markets, including a 20 percent change in oil prices and a corresponding bid in haven assets, Bitcoin remained nearly unchanged. This indicates that previous examples of safe haven behavior are spurious in nature or that its reaction function to geopolitical and macroeconomic events is still not fully understood. 

Strong Weekly Performance for Ethereum and Cosmos 

Ethereum (+6%) saw gains this week marking the second week in a row in which Ethereum was a notable outperformer. This has moderated the strong long-term trend of Bitcoin outperformance that has been in place since the peak of the previous market cycle. Cosmos (+16%) also experienced strong gains this week. 

CM Bletchley Indexes (CMBI) Insights

This week all Bletchley Indexes experienced minor losses after a week characterized by low volatility across the market. The Bletchley 20 and Bletchley 40 continued to fall against Bitcoin, still printing new lows on a weekly basis. This trend has persisted since early 2018 but over the last month has recently flattened out, potentially indicating some strength for mid and small cap assets.

Coin Metrics Updates

This week’s updates from the Coin Metrics team:

  • Coin Metrics is hiring! We recently opened up 7 new roles, including Blockchain Data Engineer and Data Quality and Operations Lead. Please check out our Careers page to view the openings.

As always, if you have any feedback or requests, don’t hesitate to reach out at

Subscribe and Past Issues

Coin Metrics’ State of the Network, is an unbiased, weekly view of the crypto market informed by our own network (on-chain) and market data.

If you'd like to get State of the Network in your inbox, please subscribe here. You can see previous issues of State of the Network here.

Check out the Coin Metrics Blog for more in depth research and analysis.

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