Bitcoin Cash (BCH) Blockchain Study Reveals 90% HODL, 10% Transactions
A new study has indicated that the vast majority of Bitcoin Cash (BCH) is being held in storage – not used for regular transactions.
Bitcoin Cash launched in August 2017 as a way to solve bitcoin’s scaling problems while maintaining the original vision of the bitcoin project as envisioned by Satoshi Nakamoto’s whitepaper.
The project expanded the blocksize limit to 8MB (and then again to 32MB). Today, Bitcoin Cash continues to offer cheaper fees than the original bitcoin (BTC) blockchain. It’s designed to be used as a daily medium of transaction – like cash. However, this latest study shows that most Bitcoin Cash is not being used for transactions.
The study was performed by blockchain intelligence firm Chainanalysis. The firm found that 90% of BCH is being “hodled”, while only 10% of BCH is used for transactions. In other words, the amount of BCH held in wallets is 10 times higher than the amount of BCH used in transactions.
How does bitcoin BTC compare? Today, the amount of bitcoin held for investment is roughly equal to the amount being held in wallets long-term.
How The Study Worked
For the study, Chainalysis divided the total supply of bitcoin and Bitcoin Cash into “monetary aggregates”, or broad categories measuring the money supply in an economy, based on liquidity.
The four categories included speculative coins (which are moved between wallets in small amounts), service transactional coins (coins held by cryptocurrency exchanges and liquidity pools to facilitate transactions), investment coins (coins held in large numbers in individual wallets for an extended period of time), and lost and unmined coins (bitcoins that can no longer be accessed by anyone).
When researchers broke Bitcoin Cash into the four categories above, they found only 1.5 million BCH coins are held for speculation and transactions, while the remaining coins are held for long-term investments.
Chainalysis studied the movement of bitcoin dating back to December 2017. They found that long-term investors sold $30 billion of bitcoin to new speculators between December 2017 and April 2018. Half of these transfers occurred in December alone. The firm described the sell-off as “unprecedented”.
One reason why bitcoin has a 1:1 ratio with held bitcoins and transactional bitcoins is because of this sell-off. A lot of long-term investors sold their bitcoin in December 2017 and onward, which means more bitcoin was being actively circulated instead of being stored in wallets.
Another reason for the high ratio with Bitcoin Cash is because it’s less-widely accepted than bitcoin. It’s a relatively new cryptocurrency, and although support is growing, awareness and acceptance of BCH is significantly lower than awareness and acceptance of BTC.
Chainalysis first became prominent in the bitcoin community after the Mt. Gox hack. They helped discover the theft of bitcoins from Mt. Gox in the days following the shutdown of the exchange. This latest study goes into a surprising amount of depth on the money supply of BTC and BCH. You can view the complete study here.