Bitcoin Dominance

What is Bitcoin Dominance?

Considering market capitalization (market cap), Bitcoin is the most valuable cryptocurrency in the world, commanding a significant percentage of the trading volume (and attention) in the cryptocurrency exchanges. We can conclude at a cumulative market cap valuation for the whole cryptocurrency space by adding the cumulative market capitalizations of all existing cryptocurrencies. 

As a result, Bitcoin dominance is defined as the ratio of Bitcoin's market capitalization to that of the remainder of the cryptocurrency markets. While Bitcoin is the most popular cryptocurrency - one of the very few still in existence - for many years, its dominance was considerably closer to 100 percent than it is now. 

Understanding the Background of Bitcoin Dominance

As new cryptocurrencies emerged, Bitcoin's supremacy began to dwindle. This is most likely due to the rise in popularity of initial coin offerings (ICOs) following the launch of Ethereum and the ERC-20 token standard.

Interestingly, "alt seasons," in which altcoins increase market share compared to Bitcoin and hence reduce Bitcoin's dominance, significantly impact Bitcoin's supremacy. However, because Bitcoin dominance is a ratio rather than an absolute phrase, it is not necessarily directly impacted by bull or bear markets. 

This means that if Bitcoin's price declines but the rest of the cryptocurrency market decreases at the same rate, Bitcoin's dominance is likely to remain unchanged. Even though Bitcoin dominance is an intriguing number to examine, it is important to remember that it does not reflect the currency's actual worth (Particularly because of forked and pre-mined coins, which have an abnormal impact on the entire market cap). 

It should also be noted that market capitalization does not imply a cash inflow. It is essentially a computation based on the current market price and supply. Once Bitcoin was the only cryptocurrency that could be traded on exchanges, it had near-complete domination. 

With other cryptocurrencies entering the market, its domination is no longer 100 percent, but that is neither good nor bad. Instead, it's just a tool to help us better understand how the crypto space is changing.