Market Cap Trend Comparison: Bitcoin vs. Top 10 Cryptocurrencies


Introduction:

In the previous post, the market cap of the top 10 cryptocurrencies were assessed for each of Bitcoin's halving cycles and a simple logarithmic model was established to estimate how much market cap growth could be expected within the current halving cycle. With Bitcoin hitting a trillion dollar market cap on February 19th (source) and the cryptocurrency market cap hitting two trillion on April 6th (source), there is a lot of excitement in the cryptocurrency space. While having experienced significant gains recently, Dogecoin is not included in the top 10 cryptocurrencies for the sake of continuity with the previous post

Method:

The method employed for this analysis is equivalent to that used in the previous post. The main difference is that instead of only assessing the market cap of the top 10 cryptocurrencies, Bitcoin's market cap is assessed individually this time. The results for the market cap growth of both the top 10 cryptocurrencies and Bitcoin are shown in the figures below.

Bitcoin's maximum market cap growth was extracted within each halving cycle and that data was used to create a simple logarithmic model of Bitcoin's market cap growth. The resulting figure is also shown below.

Results:

Figure 1 - Market cap growth of Bitcoin and the top 10 cryptocurrencies before Bitcoin's first halving event:

Market cap growth before first halving event

Figure 2 - Market cap growth of Bitcoin and the top 10 cryptocurrencies after Bitcoin's first halving event:

Market cap growth after first halving event

Figure 3 - Market cap growth of Bitcoin and the top 10 cryptocurrencies after Bitcoin's second halving event:

Market cap growth after second halving event

Figure 4 - Market cap growth of Bitcoin and the top 10 cryptocurrencies after Bitcoin's third halving event:

Market cap growth after third halving event

Based on the data presented in Figures 1-4, Bitcoin's performance and the performance of the top 10 cryptocurrencies are highly correlated (which makes sense considering that Bitcoin is both included in the top 10 and is the most significant asset by market cap in the top 10). The Pearson correlation coefficient (which can be used to define how similar or dissimilar two data sets are) for each of the halving cycles are:

  • Before first halving: 1.000
  • After first halving: 0.985
  • After second halving: 0.927
  • After third halving:  0.998

A Pearson coefficient value of 1.0 indicates that the two data sets are identical, as is the case for period of time before Bitcoin's first halving (none of the other top 10 cryptocurrencies had been created yet or had any negligible market caps at the time). The Pearson coefficient range goes from a maximum of 1.0 to a minimum of -1.0; at the minimum, the data sets are perfectly inversely correlated (if one goes up, the other goes down). At zero, there is no discernible correlation between the two data sets.

As shown in the above Figures, the market cap growth that Bitcoin experiences is very rarely bigger than that of the top 10 cryptocurrencies combined. This indicates that an index-like portfolio of the top 10 cryptocurrencies has historically performed better (in terms of market cap growth) than a portfolio of Bitcoin alone. Keep in mind that looking at the problem from the start of each halving cycle is limiting (there would only have been four buy-in events, each either at Bitcoin's inception or at each halving date).

Figure 5 - Maximum Bitcoin market cap growth model:

Bitcoin Market Cap Growth Model

In the previous post, a logarithmic market cap growth model was developed for the top 10 cryptocurrencies. In this post, a logarithmic market cap growth model was created for just Bitcoin (shown in Figure 5). The blue dots in Figure 5 show the maximum market cap growth values from the data, the orange dashed line (labeled "fit 1") shows the linear fit including only data from the first three bitcoin halving events, and the green dashed line (labeled "fit 2") shows the linear fit that you get using all of the data (including the current bitcoin halving cycle).

As can be seen, the linear fits are much more similar this time as they are almost superimposed over one another. The expected market cap growth values for Fit 1 and Fit 2 are 569% and 556%, respectively. What is especially interesting about the results is that both linear fits end up just about intersect the data-point for the maximum market cap growth for the current halving cycle. Considering Bitcoin's recent rally to new all-time highs, this might indicate that the market cap has peaked for this halving cycle. On the other hand, new forces (i.e. institutional investors, celebrities, entrepreneurs) are at play this market cycle that might change the dynamics of the cryptocurrency market.

Conclusion:

As was found in the previous post, both the market cap growth for Bitcoin and the top 10 cryptocurrencies is slowing down. That doesn't mean that growth will stop altogether, it might just mean that the market is slowly stabilizing as cryptocurrencies are being adopted by more and more individuals and institutional investors. Holding Bitcoin has historically been a great idea, but the data shown above indicates that holding other cryptocurrencies (in addition to Bitcoin) diversifies a portfolio and might yield larger gains.

 

Comment below if you want to see how a particular cryptocurrency compares against the market cap of the top 10 cryptocurrencies.

If you appreciate the post, please leave a like/comment/tip below. Additionally, if you want to support this work, feel free to donate to any of the following addresses:

BTC:  bc1qkux20yl9u0ky9jsutanclf5yt0spjhlrf0sh78
ETH: 0xB74499C370359ecf11dB2EE9B0B602625Af953C3
DOT: 15kVFuW6Mu5a6ezGoSgc4XtVqqLon9F6ugFjK2SdbG4UCSSD
XTZ: tz1gxDiDBMVpuTreH4RaYiRzHq4Ds8AqsNxA
ATOM: cosmos157557w2rcw697lct3c7p8payqawc0ywa8vmhlt
BAT: 0xB74499C370359ecf11dB2EE9B0B602625Af953C3

Disclaimer: This post should not be construed as investment advice. Any reference to an investment's past or potential performance is not, and should not be construed as, a recommendation or as a guarantee of any specific outcome or profit.

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crypto-analysis
crypto-analysis

Engineer working in the space industry, with an interest in cryptocurrencies and data analysis.


Market Cap Analysis
Market Cap Analysis

A series of posts that numerically analyze the historical and current cryptocurrency market capitalization trends.

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