A Quick History of Bitcoin Dominance
The first cryptocurrency in the world, Bitcoin, was released to the public in 2009 by a developer or group of developers going by the name Satoshi Nakamoto. Since then, despite the rise of other cryptocurrencies, bitcoin has remained the biggest and most valuable cryptocurrency in the world. Thousands of new cryptocurrencies, commonly referred to as alternative coins or altcoins, have been created as a result of its underlying technology.
The position of Bitcoin relative to other digital assets continues to be crucial and descriptive of the state of the wider crypto market. Traders and analysts use a ratio known as bitcoin dominance, sometimes known as BTC dominance, to calculate bitcoin's market value about the overall crypto market.
What is BTC Domination?
The percentage of bitcoin in the overall market value is known as "BTC domination" It is determined by dividing the market capitalization of Bitcoin by the market capitalization of all cryptocurrencies.
Why, then, is it significant? In the past, traders have been using BTC dominance to determine if alternative currencies are trending upwards or downwards about Bitcoin. For example, a common belief is that if altcoin prices are rising, the cryptocurrency market is about to enter a bull market. For instance, in 2017, a major fall in BTC's dominance signified an increase in altcoin prices (rather than a decline in BTC's price), which coincided with the market's transition into a bull phase.
From One to Many
The first cryptocurrency, Litecoin, was created in 2011, and in 2013, which Forbes magazine dubbed "the year of the bitcoin," the number of additional cryptocurrencies entering the market grew dramatically. The crypto market had at least ten tokens by May 2013, including Litecoin (LTC) and the XRP of Ripple.
In addition, as more investors learned about the world of digital assets for the first time, the price of bitcoin soared. Yet, despite having a few new players to contend with, BTC dominance remained at about 95% during this time.
Ethereum's creation
A group of programmers led by Vitalik Buterin introduced the Ethereum (ETH) network in 2015. It was positioned to compete with Bitcoin as a blockchain that permitted more use cases outside of financial services like money transfer. Bitcoin continued to control between 90 and 95 percent of the cryptocurrency market, unbothered by the competition from ether (ETH), the native unit of Ethereum. Only in 2017 - the year of the initial coin offering (ICO) frenzy - did things start to shift.
The ICO trend
From 2017 to 2018, initial coin offers (ICOs), a popular form of crowdfunding for early-stage cryptocurrency ventures, gained popularity. During this time, there were almost 2000 different ICOs, raising a total of over $10 billion. Many of the more recent cryptocurrencies that emerged at that time saw money start to move from bitcoin into them. While some investors preferred to profit from sharp price fluctuations, others were more interested in the appealing but unproven use cases. Bitcoin dominance had its first significant dip as a result of the unusual rise in altcoin competition, falling to an all-time low of about 37% in January 2018.
The Great Crypto Crash
The ICO boom was ultimately short, even though it had attracted a lot of attention to cryptocurrency. Investors were aware that many initial coin offering (ICO) projects lacked fundamentals or used shady business techniques. Several initiatives even came under regulatory scrutiny from American and other authorities. This rise in unfavorable sentiment eventually spread throughout the market, pushing all cryptocurrencies into a protracted period of price drop and stagnation.
The Recovery
Over the closing months of 2018, BTC's dominance had steadily returned to over 50% as a result of the collapse in value of numerous altcoins and the general lack of confidence among investors in ICOs.
By the end of the year, bitcoin was trading at over $7,000. The year's peak for BTC dominance was in September when it reached about 70%. Nonetheless, the digital asset would remain largely unchanged until the COVID-19 epidemic hit the world in 2020.
In a Nutshell
The market share of bitcoin has been reduced in recent years due to the expansion of the altcoin industry. Relative to its early years, when it had few rivals, bitcoin currently faces competition from DeFi tokens, the rapidly growing NFT market, and thousands of other cryptocurrencies.
Yet, according to market capitalization, bitcoin continues to lead all cryptocurrencies, and this dominance of BTC is not likely to change very soon. Due to its limited quantity, bitcoin is first and foremost regarded as a store of value by many investors, earning it the moniker "digital gold."
But more crucially, bitcoin has an advantage over other digital assets because it was the first cryptocurrency ever created. The first-mover advantage won't persist for very long, though, if something better emerges.
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