



Savvy crypto investors understand there are serious issues with comparative metrics like transactions per day and market cap. When it comes to sidecoins, which are crypto assets that base their initial coin distribution on a snapshot of the Bitcoin UTXO set at a specific block height, the issues associated with market cap calculations can become even worse.





Holders by Default





A key issue with the market cap numbers of Bitcoin sidecoins like Bitcoin Cash and Bitcoin Gold is that Bitcoin holders are effectively turned into holders of these new coins by default. In many cases, Bitcoin users have no interest in the new coin, so they simply ignore it. However, whether the users are aware of the sidecoin or not, their decision (or non-decision) to ignore the new coin means the supply numbers often used to calculate market cap on various websites are inflated.





In a recent blog post, the Coin Metrics team explained different methods used to evaluate Bitcoin sidecoins. One of the more interesting options mentioned was uptake. This is the amount of total supply of the new coin that has moved after the creation of the sidecoin. This data can be used to illustrate the relative interest in a particular sidecoin.





Of course, a lack of coin movement does not necessarily mean a user is ignoring the sidecoin. After all, a user could simply decide to hold all of the Bitcoin forks for the long term with their original Bitcoin keys. Additionally, movement of coins on the new network could simply be a user dumping the sidecoins on the market.





For these reasons, it’s unclear how to measure the supply of sidecoins. All that we do know is the supply numbers will be inflated at some level due to things like a lack of knowledge of the sidecoin’s existence, not wanting to move the coins over privacy concerns, simply choosing to ignore the sidecoin, or not having the ability to move the sidecoins for whatever reason.





Theoretically, the same argument could apply to Bitcoin itself. For example, a hardcore Bitcoin Cash supporter who simply ignores their UTXOs on the Bitcoin chain would be taking those coins out of circulation and decreasing the available supply of bitcoin on the market. Of course, it’s much less likely that someone would ignore Bitcoin after choosing to buy it in the first place.





Additionally, these arguments hold true for sidecoins based on non-Bitcoin coin distributions. For example, Bitcoin SV came out of a split with Bitcoin Cash.





An interesting attribute of sidecoins’ artificially high market caps is that the issue is worse for coins that are less popular. Less notable coins are more likely to be ignored by bitcoin holders, which means the sidecoins’ supply numbers will be more overstated.





Like many other aspects of crypto assets, the extent of this particular issue with the market caps of Bitcoin sidecoins is difficult to quantify.







