New Research: 90% of Bitcoin Cash Not Used for Transactions

Avi Rosten
  • The research published by Chainalysis shows that BCH is held far more as investment than BTC
  • The study also showed that the trend for BTC is away from investment

New research published today shows that bitcoin cash (BCH) is actually used far less for transactions than its rival bitcoin (BTC).

The study by Chainalysis, the blockchain intelligence company famous for their role in uncovering the Mt Gox hack, shows that the proportion of bitcoin cash used for investment is actually far higher than bitcoin - with the amount of BCH held for investments dwarfing the amount used for transactions by a ratio of 10:1, while the ratio for bitcoin is at 1:1.

The study split all the coins held in both BTC and BCH according to a scale of liquidity from the most liquid, speculative coins moved around in small amounts(M0); to coins used by exchanges and services for transactions (M1); coins held for investment (M2); all the way to illiquid lost coins and coins yet to be mined (M3) - as follows:

m0m4.pngSource: Chainalysis

What is interesting is that despite the stated purpose of BCH to be a more usable, real-world currency with a larger blocksize and smaller transaction fees, far less is actually used in that way.

Although as of April 2018, 7.3 million BTC were held for investment, compared with 1.5 million BCH, the difference in proportional usage is huge - as this chart shows:

Picture2.pngSource: Chainalysis

Opposing Trends

With 90% of BCH not in transactional use, it is not only the proportion that is massively different, but the way the market is moving.

As per the research, since September 2015, the majority of bitcoin had been held for investment, but the trend for bitcoin is moving towards greater liquidity: as of April 2018, only 50% of bitcoin is held for investment, down 20% for the year.

For BCH, conversely, the trend has actually been towards less liquidity - with the transactional bitcoin cash - categories M0 and M1 - declining from 15% in November 2017 to only 7% in April 2018.

With the bitcoin cash vs. bitcoin debate still in full swing, doubtless more research will be used by both sides to justify their positions. What is clear, however, is that this latest research will be seen by many bitcoin advocates to question the narrative of the bitcoin cash community.