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Bitcoin Dominance In Crypto Market

24 February 2023 11:13, UTC

Bitcoin is not the sole participant in the entire crypto market, nevertheless it wields significant power. Therefore, today’s blog post is dedicated to the market dominance of Bitcoin.

Bitcoin, the world's largest and oldest cryptocurrency, remains one of the most trustworthy and fluid digital assets. Given Bitcoin's scale and prestige, many crypto traders closely monitor its price action.

"Bitcoin domination" is one statistic used to assess Bitcoin's effect. While utilizing Bitcoin dominance has several drawbacks, it can assist crypto traders in determining the power of cryptocurrencies.

Defining Bitcoin Dominance

Bitcoin domination is the existing proportion of the total crypto market cap held by Bitcoin. The value currently contained in an asset is referred to as its market capitalization. Market capitalization is often expressed in regards to fiat currencies such as USD.

In cryptocurrency, a market cap is calculated by multiplying the amount of accessible tokens by the token's current value.

Bitcoin Market Dominance Calculation

To assess Bitcoin dominance, you must first understand Bitcoin's current market cap as well as the entire crypto market cap. Most respectable coin price aggregator websites display this information on their homepage. Divide the Bitcoin market cap by the worldwide crypto market cap after you get these figures. This formula will show the percentage of money in the cryptocurrency market that is kept in Bitcoin.

For example, suppose Bitcoin's market capitalization is $366 billion and the worldwide crypto market capitalization is $983 billion. 37% is obtained by dividing $366 billion by $983 billion. This means that Bitcoin currently accounts for 37% of the worldwide crypto market valuation.

Real Bitcoin Dominance Explained

Although real Bitcoin dominance is less well-known than standard Bitcoin dominance, some traders feel it delivers a more accurate proportion. Users divide Bitcoin's market size by the overall market cap of digital currencies that employ Bitcoin's proof-of-work (PoW) protocol under this approach.

Supporters of the true Bitcoin dominance percentage believe that the majority of Bitcoin's rivals continue to adopt the PoW consensus process. As a result, comparing Bitcoin's performance against that of other cryptocurrencies may be useful.

This essentially limits Bitcoin's competition to only these rivals, stating that proof-of-stake (PoS) tokens aren't focused on serving as a global store of value and are instead concerned with other issues. Many other cryptocurrencies, for example, are dedicated to industries such as play-to-earn games, oracle algorithms, or blockchain governance. A significant proportion of cryptocurrencies are USD-pegged stablecoins. The best example for such cryptocurrencies is Tether (USDT). If you are one of the USDT users and want to sell USDT in Dubai, all you need to do is to visit our website.

While not everyone agrees that true Bitcoin dominance is superior to conventional Bitcoin dominance, it might provide traders with a fresh angle on Bitcoin's market share.

Use Cases Of Bitcoin Dominance

People frequently use Bitcoin dominance among a variety of data sources to gain a comprehensive understanding of the cryptocurrency sector. When Bitcoin supremacy initially gained popularity, since the 2017 bull market, traders were particularly concerned about how altcoins performed in comparison to Bitcoin. Users have also discovered a link involving Bitcoin dominance and general market circumstances.

When the market is bearish, crypto consumers tend to withdraw from problematic small-cap or mid-cap altcoins and spend money in stablecoins or proven large-cap projects like Bitcoin. While utilizing Bitcoin dominance to assess bullish vs bearish situations is not a precise science, some feel it may suggest a shift in market mood.

Users may have a better understanding of the crypto market mood by integrating all of this data. After looking at a Bitcoin dominance chart carefully, a user may consider buying or selling Bitcoin in Dubai.

Factors Affecting Bitcoin Dominance

The simple reason for Bitcoin dominance shifting is that Bitcoin's market cap grows or falls in comparison to altcoins. However, the following factors may alter Bitcoin's dominance percentage: 

Increasing interest in altcoins – Bitcoin's proportion of the whole crypto market will surely diminish as the amount of altcoins, stablecoins, and NFT (non-fungible token) collections grows. Although Bitcoin remains the most powerful and liquid digital asset, the addition of other cryptocurrencies may diminish its dominance score. 

Appetite for risk – Throughout bull markets, crypto traders tend to exit established cryptocurrencies such as Bitcoin and spend money in risky small-cap coins. During a bad market, users may spend their money in major enterprises such as Bitcoin.

Market cap of stablecoin – Because of its durability, users frequently see Bitcoin as the safest cryptocurrency. However, as stablecoins have grown more publicly available, they have become a more appealing alternative for traders looking for a safe cryptocurrency. The more individuals choose stablecoins like Tether (USDT) over Bitcoin during weak markets, the less dominant Bitcoin will become.

The Reliability Of Bitcoin Dominance

Whereas Bitcoin dominance has been a frequent instrument in crypto commerce, here are some concerns about its dependability. A few things might affect the approved Bitcoin dominance score's accuracy.

Not competing – Not all altcoins compete with Bitcoin. Indeed, many altcoins wish to work with Bitcoin to improve their unique ecosystems. The supremacy of Bitcoin ignores the different purposes of other cryptocurrencies against Bitcoin.

Taking stablecoins into account – When more individuals convert their currency into USD-pegged stablecoins, it may appear that Bitcoin's power is waning. Whilst stablecoins are essentially altcoins, there is no expectation that their value will vary. For examining Bitcoin's relationship with altcoins, find Bitcoin dominance with no stablecoins included in the calculation.

Scams – The entire crypto market cap is affected whenever a new currency is published on the crypto market. Even if these little enterprises are scams or have no possibility of long success, they will have an influence on Bitcoin's dominance percentage.

Lost Bitcoins don't count – It's unclear how many Bitcoins are trapped in unrecoverable wallet addresses. We also have no idea how many more Bitcoins may be mistakenly burnt. However, recent estimates indicate that at least 20% of Bitcoin's supply remains unavailable. If this is the case, Bitcoin's market cap will shift, altering existing Bitcoin dominance scores.

Wrapping It Up

It's tough to determine how useful Bitcoin dominance will be if altcoins, stablecoins, and NFTs proceed to overwhelm the crypto market. Some claim that the altcoin market is currently too huge to get any useful information from a Bitcoin dominance graph. Furthermore, some say that Bitcoin's popularity creates the misimpression that Bitcoin is in contest with every cryptocurrency. Bitcoin serves a specific function as a value store and a peer-to-peer payment method. However, if Bitcoin stays the largest cryptocurrency, it will most likely wield enormous power over the whole sector. As a result, Bitcoin's supremacy is likely to stay relevant for many cryptocurrency traders.

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