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Bitcoin dominance steady in uncertain times

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Bitcoin dominance represents 64% of the total market capitalization of the cryptocurrency market. In the past, however, this has fallen to around 32% at the height of the altcoin rally in January 2018. Since that time, Bitcoin’s dominance has climbed slowly to where it is today.

BTC’s share of market capitalization is one of the methods used to measure sentiment in the cryptocurrency market. Let’s look back at past trends of the BTC price and its share of market capitalization.

During the period from the advent of BTC until around January 2017, BTC accounted for 80%-90% of the market capitalization of the entire cryptocurrency market. However, this market balance collapsed when money started to flow into newly issued altcoins in January 2017 on the back of a hike in the BTC price and a sharp increase in Initial Coin Offering (ICO) projects.

A rapid increase in the market capitalization of altcoins such as ETH and XRP resulted in a sustained fall of BTC’s share of market capitalization. This happened when risk-on sentiment increased in the cryptocurrency market where BTC’s dominance fell due to the rapid growth of the altcoin market, which can be perceived to offer higher risks and higher returns when compared to BTC.

Although BTC’s share of market capitalization picked up temporarily during and after July 2017 due to an increase in the BTC price, which hit a then-record high, it fell sharply to the 30% range following the plunge in the BTC price in January 2018. Subsequently, BTC’s share of market capitalization remained in the 30%-40% range until August 2018.

However, BTC’s share of market capitalization began to increase again when it became clear that many ICO projects were missing roadmap deadlines and user targets in the second half of 2018. When the BTC price fell from USD 6,359 to USD 3,821 in November 2018, BTC’s share of market capitalization remained in the 50% range. Since that time, BTC’s share of market capitalization has remained in the 50%-60% range.

When the BTC price was near the USD 10,000 level in January-February 2020, BTC’s share of market capitalization fell slightly as investors turned to altcoins for a brief rally that failed to gain long term traction. Bitcoin’s dominance has since held steady as investors began to anticipate a potential rally following the Bitcoin halving in May this year.

With the recent turmoil in global markets due to the COVID-19 pandemic, high-risk assets such as altcoins may find difficulty catching a bid until conditions improve. From one perspective, they have held up surprisingly well considering the flight to cash that has impacted all markets. As a section of investors allocate towards gold and bitcoin as a hedge against the discretionary money printing of central banks, Bitcoin’s dominance may increase further during the rest of this year.

Bitcoin can be traded on Binance and Bitmex.



Masayuki Tashiro, Khareem Sudlow