Bitcoin was founded in 2009. 13 years later, Bitcoin is still the most dominant cryptocurrency. In fact, it remained the sole cryptocurrency owning the whole crypto market share up until Litecoin was created in October 2011, two years later. Others followed over the years, including Dogecoin and Ethereum.
Calculating Bitcoin Dominance
Calculating Bitcoin dominance is simple. Simply divide the market capitalization of Bitcoin by the combined market cap of all other cryptos.
Bitcoin dominance = BTC Market cap/altcoins market cap
Understanding Bitcoin Dominance
Bitcoin dominance, referred to as BTC domination, measures the ratio of Bitcoin market capitalization versus that of all other cryptocurrencies (altcoins). Put differently, Bitcoin dominance denotes the share of Bitcoin in the cryptocurrency market.
Bitcoin dominance is inversely proportional to the altcoins. This means that when Bitcoin dominance increases, altcoin dominance reduces.
According to crypto news today, during the crypto bull run, Bitcoin market share tends to decline. The reason is that the increasing market capitalization of other cryptos pushes their combined market cap higher than Bitcoin’s. However, a bearish market does necessarily have the same effect on the market. This means Bitcoin dominance is not affected by altcoins.
Here is an interesting fact. Bitcoin dominance is at the same level it was in 2018 despite the number of cryptocurrencies growing ten times. According to Casa Bitcoin Wallet Chief Technology Officer Jameson Lopp, Bitcoin dominance is at 41% in April 2022,
with over 15000 altcoins in existence. Surprisingly, the digital coin had a market share of 42% four years ago, with 1500 altcoins sharing the rest. During these four years, altcoins have increased ten times, and the value of the pioneer satoshi coin has gained about 400% from $8000 in May 2018.
It is likely Bitcoin will continue being a leader in the crypto world as its closest rival, the Ethereum coin, has an 18% market share. However, Ethereum is switching to a proof of stake consensus mechanism, which could see it eat into the bitcoin share.
Bitcoin Market Dominance Over Time
At the dawn of the crypto world, Bitcoin owned the whole crypto market until other digital coins started entering the market. Even with the creation of other virtual coins, Bitcoin dominance was over 97% up until 2017, when it fell to 95%. This massive dominance was primarily due to a lack of competition.
But in 2017, Bitcoin’s fortunes changed after the entry of new digital coins. It even declined further as investors flew to altcoins. It is, without doubt, one of the worst years for Bitcoin.
The Altcoin season was on. For instance, XRP gained 1.1% share while Ethereum hived off 5.7% of the market. On the other hand, Bitcoin dominance plunged from 95% in March 2017 and hit 35% in January 2018. Altcoins enjoyed almost twice the market share.
What Caused the Fall of Bitcoin Dominance
The leading cause of this change was a massive change in crypto liquidity as investors shifted to altcoins. The great crash saw the Bitcoin price come a cropper. In fact, Flippening was almost certain. The low Bitcoin price gain provided a good buying opportunity, wooing crypto investors. In addition, many Initial Coin Offering (ICOs) also failed, and new investors lost money. At this point, Bitcoin proved to be a safer investment.
Bullish pressure started flowing from altcoins and investing in Bitcoin via forex brokers and binary options brokers was the new trend, partially also due to many expert analysts that predicted for BTC to reach new ATH. As a result, the market share increased steadily to hit 72% in October 2019, coinciding with the bull run. The up and down roller coaster came into play. Bulls turned bears pushed Bitcoin’s market share to 57% in September 2020. However, the market share proliferated to 73% at the beginning of 2021 before falling four months later to hit 40% in May 2021. One year later, Bitcoin market dominance is oscillating around 40%, a zone it last hit four years ago in 2018.
The biggest threat to the bitcoin share market is Ethereum. The largest altcoin is boasting a 17% market dominance. This significant growth is caused by the belief that potential investors are trying to diversify and find good returns in altcoins. But it is still a drop from its highest level when Ethereum dominance hit 25% in 2017.
Bitcoin is still the largest cryptocurrency, that’s for a fact. However, Ethereum, Tether meme coins, and other altcoins have lined up projects each to increase their market share. Whether Flippening will happen is a wait-and-see situation.