Bitcoin Dominance: History and Predictions

Table Of Content

• Content

• Conclusion

• FAQ

• You May Also Like

• External Links

The term "Bitcoin domination" refers to BTC's proportion of the total capitalization of the cryptocurrency market. Since its debut in 2009, the cryptocurrency market has been dominated by bitcoin, the first and still the only digital asset. But gradually, things began to alter. Alternate cryptocurrencies began contributing to the total value of the cryptocurrency market cap in 2013. Ethereum, Bitcoin's closest competitor and the creator of the ether cryptocurrency, was born in 2015, and Bitcoin's market share dropped to an all-time low in 2017 due to the ICO boom before rising back to over 50% in a matter of months. DeFi, NFT, and metaverse tokens, together with more than 20,000 other cryptocurrencies, pose the greatest threat to BTC's current market dominance.

Bitcoin, the first decentralized digital currency, was released to the public in 2009 by an anonymous developer or group of developers going by the name Satoshi Nakomoto. Since then, several cryptocurrencies have emerged, but Bitcoin has remained by far the most popular and valuable of them all. The technology it's built on has also sparked the creation of hundreds of additional cryptocurrencies, known as "altcoins."

Bitcoin's position relative to other digital assets remains very relevant and indicative of the general status of the cryptocurrency industry. Bitcoin dominance, also known as BTC dominance, is a ratio used by traders and analysts to determine bitcoin's market cap in relation to the whole crypto market.

What is BTC Dominance?

Bitcoin's (BTC) market share is the proportion of the total value of the cryptocurrency market that is held in bitcoin. This figure is arrived at by simply dividing the entire market cap of all cryptocurrencies by BTC's market cap.

However, why does this matter? Traders have always looked to BTC dominance to deduce if altcoins are rising or falling relative to bitcoin. If altcoins are rising in value, for instance, there is a school of thought that predicts a bull market is forming in the cryptocurrency market as a whole. During the 2017 bull market, for example, a substantial drop in BTC dominance signified a rise in altcoin values rather than a reduction in BTC price.

From One Cryptocurrency to Thousands

The first alternative cryptocurrency, litecoin, emerged in 2011, and their numbers rapidly increased in 2013, which Forbes magazine called "the year of the bitcoin." There were at least 10 tokens, such as litecoin (LTC) and Ripple's XRP, in circulation by May 2013.

At the same time, the value of bitcoin shot upward as new investors entered the digital asset market. In spite of these new entrants, BTC maintained a near-95 percent market share throughout this time.

The birth of Ethereum

Ethereum (ETH) was released in 2015 by Vitalik Buterin and a group of engineers. Its goal was to compete with Bitcoin as a blockchain that could be put to use in a wider variety of contexts than just money transfers. Despite the rise of ether (ETH), Ethereum's native token, bitcoin maintained its dominance in the cryptocurrency market. The initial coin offering (ICO) explosion of 2017 marked the beginning of a new era.

ICO fever

Crowdfunding via initial coin offerings (ICOs) for new cryptocurrency ventures has grown in popularity over the last year. Over $10 billion was raised in approximately 2000 separate ICOs within this time frame. Many of the newest altcoins emerged at this time, and Bitcoin investors started pouring their money into them. Some investors put their faith in promising but untested applications, while others looked to capitalize on wild price fluctuations.

Since its all-time high of over 45% in December 2017, bitcoin's share of the cryptocurrency market has steadily declined, reaching a new low of 37% in January 2018 due to the extraordinary surge of competition from altcoins.

2018’s crypto winter

While the ICO bubble did get a lot of media coverage, it didn't last. Investors saw that many ICO ventures had sketchy business models or other basic flaws. U.S. and international regulators began looking into specific projects as a result. Eventually, this wave of pessimism spread across the crypto market, causing prices across the board to drop and remain low for many months.

Bitcoin’s recovery

As the value of numerous cryptocurrencies plummeted and investors were generally disillusioned with initial coin offerings (ICOs), BTC's dominance steadily rose back to over 50% by the end of 2018.

The price of bitcoin saw a little recovery in 2019, ending the year at approximately $7,000, while BTC's market share reached a high of around 70% in September. In contrast, the value of the digital asset would be steady until the 2020 global outbreak of the COVID-19 virus.

The COVID market

Beginning in 2020, after a brief, COVID-filled slump, the cryptocurrency market would begin a record-breaking bull run. BTC dominance would peak at 72% in January 2021, its highest level since 2017, and then drop to 39% by the middle of the same year.

A large number of individuals, fearing they would be quarantined at home for the duration of the impending epidemic, started engaging in day trading and investing as a kind of entertainment. Meanwhile, governments over the globe made financial transfers to revive their faltering economies in the midst of the epidemic. A significant amount of this money was first invested by retail traders in the stock, forex, or cryptocurrency markets.

Since the second half of 2020 saw a surge in media coverage of cryptocurrencies, altcoins have become an appealing, if hazardous, option for retail investors, particularly those who are just getting started in the cryptocurrency market and are hoping to make rapid profits. To provide only one example, in 2021 the price of Shiba Inus (SHIB) increased by more than 40,000,000%.

Additionally, bitcoin lost ground in the market because of the proliferation of rival technologies, such as Ethereum and Solana (SOL), which provide decentralized finance (DeFI) and non-fungible tokens (NFTs). For instance, institutional and retail interest in Solana's core technology led to a meteoric rise in the price of Solana's stock from $1.50 in 2020 to a record high of $250 in 2021.

Since then, it has been difficult for BTC dominance to get beyond the 50% mark. The recent sluggish rise in BTC dominance may be attributable to ETH 2.0, Ethereum's long-awaited transition to proof-of-stake, and the prolonged bear market.

Conclusion

Bitcoin's dominance in the cryptocurrency industry has been eroded by the proliferation of other cryptocurrencies in recent years. In contrast to its early years, when there were few rivals, bitcoin currently faces competition from hundreds of different cryptocurrencies, including the highly popular NFT sector and the DEFI tokens. However, bitcoin is still the largest cryptocurrency by market value, and this trend is expected to continue for the foreseeable future.

FAQ

If BTC's market share increases, what will happen?

When Bitcoin's market share grows compared to that of other cryptocurrencies, it usually indicates that more individuals are buying Bitcoin. This might indicate that Bitcoin is appreciating at a quicker rate than other cryptocurrencies or that it is depreciating at a slower rate.

What does Bitcoin's hegemony imply?

Insofar as altcoins continue to respond strongly to Bitcoin's price changes and its fluctuating dominance, the Bitcoin dominance ratio may be used as a measure to evaluate the present emotion in the cryptocurrency market. For the most part, cryptocurrencies trade in either a downtrend or an upswing compared to Bitcoin.

Where does BTC's strength come from?

The so-called "alt seasons," in which other cryptocurrencies gain market share compared to Bitcoin, have an interesting effect on Bitcoin's supremacy. As a ratio rather than an absolute word, however, Bitcoin's dominance is not necessarily immediately influenced by bull or bear markets.

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.

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External Links

• Bitcoin market dominance - its market cap relative to the market cap of all other cryptocurrencies in the world

• Bitcoin (BTC) Dominance: How It Changes the Way You Trade Crypto

• Bitcoin’s Crypto Dominance Is Strongest Since Bull Market Highs

• Chart. Chat. Trade. Repeat

• Bitcoin Dominance Chart: What Is It and Why Is It Important?

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