What is Bitcoin Dominance?

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Bitcoin is the world’s biggest cryptocurrency by market capitalization (market cap) and holds a large percentage of the trading volume in the cryptocurrency markets. 

The total market capitalization of the cryptocurrency market is a sum total of the market cap of all the existing cryptocurrencies, Hence, Bitcoin dominance is the ratio between the market cap of Bitcoin to the market cap of the rest of the cryptocurrency market.

Bitcoin has retained its place as the largest cryptocurrency by market cap for several years. Its dominance was much closer to 100% than it is today. However, Bitcoin dominance declined to a large extent as new cryptocurrencies were introduced to the market. This could be attributed to the increased popularity of ICOs after the introduction of Ethereum and the ERC-20 token standard.

Altcoin Seasons

It’s worth noting that Bitcoin dominance is constantly affected by “alt seasons”, whereby altcoins gain a higher market share than Bitcoin, thus reducing Bitcoin’s dominance. However, Bitcoin dominance is not always directly affected by bull or bear markets because it is a ratio, not a definite term. 

Thus, if Bitcoin falls in price, but the rest of the cryptocurrency market falls at a similar rate, then Bitcoin dominance is likely to remain the same.

Even if Bitcoin dominance is a fascinating statistic to look at, you should understand that it does not reflect its real value due to the forked and pre-mined coins, which impact the total market cap in a very artificial way.  

In addition, market cap does not mean an inflow of money. It is just a ratio based on the circulating supply and current market price. Bitcoin dominance is simply a tool that gives us a better perspective of how the crypto space is evolving.

Why does Bitcoin Dominance exclude stablecoins?

Stablecoins serve as a bridge between cryptocurrency and everyday fiat currency because their prices are pegged to a reserve asset like the U.S. dollar or gold. Stablecoins offer lower volatility than cryptocurrencies like Bitcoin and Ethereum. It’s a form of digital currency that is better suited to serving everyday use and for making transfers between exchanges.

Due to the fact that the real Bitcoin Dominance Index is only focused on tracking which cryptocurrencies are capable of becoming global money replacements one day, stablecoins cannot be included since their value and purpose depends on the existence of fiat money.