Bitcoin Average Dormancy: A Measure of Turnover and Trading Activity

Smith, RD. (2018). Bitcoin Average Dormancy: A Measure of Turnover and Trading Activity. Ledger, 3, 91-99.

9 Pages Posted: 26 Jun 2017 Last revised: 22 Nov 2018

Date Written: June 25, 2017

Abstract

Attempts to accurately measure the monetary velocity or related properties of Bitcoin have often attempted to either directly apply definitions from traditional macroeconomic theory or to use specialized metrics relative to the properties of the Blockchain such as bitcoin-days destroyed. In this paper, it is demonstrated that beyond being a useful metric, bitcoin-days destroyed has mathematical properties that allow one to calculate the average dormancy (time since last use in a transaction) of the bitcoins used in transactions over a given time period. In addition, transaction volume and average dormancy are shown to have unexpected significance in helping estimate the average size of the pool of traded bitcoins by virtue of the expression Little's Law, though only under limited conditions.

Keywords: monetary velocity, days destroyed, Little's Law

JEL Classification: C02, E4, E5, G1

Suggested Citation

Smith, Reginald, Bitcoin Average Dormancy: A Measure of Turnover and Trading Activity (June 25, 2017). Smith, RD. (2018). Bitcoin Average Dormancy: A Measure of Turnover and Trading Activity. Ledger, 3, 91-99., Available at SSRN: https://ssrn.com/abstract=2992404 or http://dx.doi.org/10.2139/ssrn.2992404

Reginald Smith (Contact Author)

Supreme Vinegar LLC ( email )

3430 Progress Dr.
Suite D
Bensalem, PA 19020

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