The term Bitcoin dominance has always been appearing everywhere in the CRYPTO world.
What is Bitcoin Dominance?
At the very top of the CoinMarketCap’s homepage, you will always see this number. However, what does this number means?
Calculating BTC dominance is very direct. If the total Market CAP of all Cryptocurrencies is $1 Trillion whereas Bitcoin’s Marketcap is 400 Billions. Then Bitcoin’s dominance would be 60%.
Let’s look at history
In 2013, Bitcoin had a market dominance of 94%. ERC-20 tokens didn’t exist back then, Ethereum, stablecoins, USDT didn’t even exist then too.
Fast forward to 2017, the altcoin season began. In Feb 2017, Bitcoin dominance was 85.4% whereas Ethereum was $5.7%. However, within 4 short months, Bitcoin dominance drop to just 40%. Bitcoin prices then crashed after the legendary first bull run in 2017 before going to a Bitcoin’s dominance at time low of 32.8%.
If we just look at Bitcoin dominance, we will only see part of the story. Why do I say so? Look at the two tables below.
If we look at today, BTC dominance is 39.4% whereas ETH dominance is 20.3% compared to early part of the year.
If we look at early part of the year, BTC dominance is 40.0% whereas ETH dominance is 19.91% compared to early part of the year.
However, everyone know that we are in a bear market. Many alts died. UST/LUNC killed many. Eth and BTC prices were relatively low as compared to last year or even YTD. Total Cryptocurrency Market Cap as 2T compared to 1T now.
Bitcoin Dominance Metric usefulness
Hence, BTC dominance only give you a part of the picture of the whole story. It can tell you a gentle idea of how much of your capital you should allocate to altcoins as compared to ETH/BTC but it is not the full picture. Do also bear in mind that the Crypto market CAP is only 1 trillion as compared to other asset classes. How high will BTC/ETH goes and will BTC dominance goes below ETH in future? Your guess will be as good as mine. But I am optimistic about Crypto in the long term.
(Anyway, I have shorted Bitcoin this morning during this week of intense volatility in view of ETH merge is coming this week for a short term trade. Wish me luck! Disclaimer: Don’t follow me without doing your own due diligence.)
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