According to CoinmarketCap, Bitcoin dominance stands at exactly 69.7% at the time of writing. However, more critical analysis suggests that Bitcoin dominance is actually over 90%. This piece of information may come as a surprise to many, but let’s take a closer look and find out how this figure was arrived at.
Bitcoin dominance refers to the ratio of Bitcoin capitalization to the overall market capitalization of cryptocurrencies. During the altcoin boom that characterized the days when ICOs were popular, Bitcoin dominance was much lower than what we have today. Until the beginning of 2019, Bitcoin dominance was around 33%. The turnaround in fortune suggests that funds are moving away from altcoins into Bitcoin. At least for the time being.
Bitcoin Dominance Is A Tool For Technical Analysis
This price and market capitalization behaviour is a tool used by a lot of traders in the marketplace. Sometimes, it serves as a pointer towards what direction the big monies are moving. It is assumed that it is always safe to stay with the big monies when navigating the trading environment. Some traders put it this way: “The Whales control the Wave”.
The idea that Bitcoin dominance is actually over 90% comes from a more critical analysis of the factors that determine valuation. Most crypto users derive their information about price, volume and market capitalization from websites like CoinmarketCap.
The formula used by these platforms is simply a multiplication of price and circulating supply. A closer look will tell you that this system can be flawed because anyone can simply trade a premined coin for any price. Multiplying the price by the total supply will not give us a realistic value, since the coins aren’t serving any utility yet.
Liquidity Is More Critical Than Price
The argument for a different method of calculating market capitalization suggests that the liquidity of the cryptocurrency in question must be considered. This is the basis of the assumption that
Bitcoin dominance is actually over 90%.
Here is a summarized explanation of this idea:
It is safe to say that every token that is being traded in the cryptocurrency market today depends on Bitcoin for a large percent of its liquidity. Almost all, if not every single token that is listed on an exchange has a Bitcoin trading pair associated with it. This places Bitcoin as a universal cryptocurrency. It is the lubricant that makes it possible to exchange many altcoins in the market.
Take for instance, when trying to trade between altcoins that are not directly paired against each other in an exchange. What most traders do is to exchange the initial altcoin with Bitcoin, and then secondarily use the Bitcoin to purchase the second altcoin. This is a very regular occurrence on normal exchanges. This practice puts Bitcoin everywhere and contributes immensely to the high liquidity level.
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Volume Provides Better Information Than Price
The only platforms that provide direct exchange between altcoins are the more unconventional peer-to-peer platforms like Vertex.Market. Here, you wouldn’t need to go through multiple stages to fulfill your altcoin trades. It could even save you value in terms of time and fees.
Considering how complex it could be to measure liquidity, the closest index that can be used is volume. Therefore, the trading volume of a given cryptocurrency, factored with the current supply should produce a better valuation. This method puts Bitcoin dominance over 90%, in comparison with the rest of the market.
Bitcoin is known as the “Big Brother” of cryptocurrencies. It has sustained its leadership despite the various challenges that it has encountered along the way. As mentioned above, a significant part of Bitcoin’s huge demand is because other cryptos need it to survive. When this is put into consideration, we will tend to agree that Bitcoin dominance is actually over 90%.
Bitcoin dominance is actually over 90%
Bitcoin dominance refers to the ratio of Bitcoin capitalization to the overall market capitalization of cryptocurrencies. During the altcoin boom that characterized the days when ICOs were popular, Bitcoin dominance was much lower than what we have today. Until the beginning of 2019, Bitcoin dominance was around 33%. The turnaround in fortune suggests that funds are moving away from altcoins into Bitcoin. At least for the time being.
Bitcoin Dominance Is A Tool For Technical Analysis
This price and market capitalization behaviour is a tool used by a lot of traders in the marketplace. Sometimes, it serves as a pointer towards what direction the big monies are moving. It is assumed that it is always safe to stay with the big monies when navigating the trading environment. Some traders put it this way: “The Whales control the Wave”.
The idea that Bitcoin dominance is actually over 90% comes from a more critical analysis of the factors that determine valuation. Most crypto users derive their information about price, volume and market capitalization from websites like CoinmarketCap.
The formula used by these platforms is simply a multiplication of price and circulating supply. A closer look will tell you that this system can be flawed because anyone can simply trade a premined coin for any price. Multiplying the price by the total supply will not give us a realistic value, since the coins aren’t serving any utility yet.
Liquidity Is More Critical Than Price
The argument for a different method of calculating market capitalization suggests that the liquidity of the cryptocurrency in question must be considered. This is the basis of the assumption that
Bitcoin dominance is actually over 90%.
Here is a summarized explanation of this idea:
It is safe to say that every token that is being traded in the cryptocurrency market today depends on Bitcoin for a large percent of its liquidity. Almost all, if not every single token that is listed on an exchange has a Bitcoin trading pair associated with it. This places Bitcoin as a universal cryptocurrency. It is the lubricant that makes it possible to exchange many altcoins in the market.
Take for instance, when trying to trade between altcoins that are not directly paired against each other in an exchange. What most traders do is to exchange the initial altcoin with Bitcoin, and then secondarily use the Bitcoin to purchase the second altcoin. This is a very regular occurrence on normal exchanges. This practice puts Bitcoin everywhere and contributes immensely to the high liquidity level.
codey on Twitter
Volume Provides Better Information Than Price
The only platforms that provide direct exchange between altcoins are the more unconventional peer-to-peer platforms like Vertex.Market. Here, you wouldn’t need to go through multiple stages to fulfill your altcoin trades. It could even save you value in terms of time and fees.
Considering how complex it could be to measure liquidity, the closest index that can be used is volume. Therefore, the trading volume of a given cryptocurrency, factored with the current supply should produce a better valuation. This method puts Bitcoin dominance over 90%, in comparison with the rest of the market.
Bitcoin is known as the “Big Brother” of cryptocurrencies. It has sustained its leadership despite the various challenges that it has encountered along the way. As mentioned above, a significant part of Bitcoin’s huge demand is because other cryptos need it to survive. When this is put into consideration, we will tend to agree that Bitcoin dominance is actually over 90%.
Bitcoin dominance is actually over 90%