A Look at Bitcoin Dominance
Summary
- Bitcoin is still king!
- Bitcoin’s dominance is currently 61%
Since the inception of Bitcoin over 10 years ago, thousands of other cryptocurrencies have surfaced. These alternative currencies are called altcoins. Bitcoin dominance is an indicator that compares Bitcoin’s market cap against the whole cryptosphere.
Bitcoin’s current dominance is 61%, meaning, 61% of the total value of cryptocurrencies is Bitcoin. In other words, Bitcoin’s market cap of $125B is 61% of the whole cryptosphere’s combined market cap of $192B.
Analyzing Bitcoin Dominance
After taking a look at Bitcoin dominance data from the last 7 years, Bitcoin enjoyed a crypto monopoly during its early years, and to some extent still is.
Bitcoin dominance was relatively constant during its early years primarily due to the lack of altcoin awareness. As other currencies grew in value comparative to Bitcoin, the digital gold’s market share decreased.
2017-2018
The spikes in the chart are attributable to whats commonly referred to as the “altseason”. Altseason is a period in time where altcoins are rallying against Bitcoin.
During the first altseason, in mid-2017, Etheruem rallied from $18 to over $300, a 20x gain. This rapid increase in Ethereum’s price spurred other altcoins to rally as well, diluting Bitcoin’s market cap. As a result, Bitcoin’s dominance dived to a measly 37%. However, not long after, altcoins corrected, shooting Bitcoin’s dominance back up to 60%.
The second altseason came shortly after Bitcoin reached its all-time high and had begun to correct. In addition to Bitcoin correcting and losing market share, altcoins began to rally. During this period Ethereum reached an all-time high north of $1,000. As a result, Bitcoin dominance took a nosedive, bottoming out at 34%. However, like the first altseason, altcoins corrected once again pushing Bitcoin dominance to over 50%.
2018-2020
Following the bull run in 2017, cryptocurrencies as a whole experienced a massive correction. During this market-wide correction Bitcoin dominance actually increased. As a result, altcoins were crushed, with Bitcoin remaining the king of cryptocurrencies.
Bitcoin dominance has been relatively stable around 60% for the past year.
Why it Matters
Bitcoin dominance has long been a key indicator of altcoin performance. A high Bitcoin dominance generally translates into poor altcoin performance and vice versa.
In addition, Bitcoin dominance is useful in preparing for large market movements. Taking another look at Bitcoin dominance reveals that Bitcoin holds its value better than altcoins during a correction, as the dominance historically rises during a correction.
Many opinions state that during the next marketwide correction, Bitcoin dominance will rise to a point where many altcoins will cease to exist. As a result, analyzing trends in Bitcoin dominance is vital to understanding the situation of the market.
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