Visualizing BTC dominance over the years (2013–2021), based on the market cap
It has been a year of achievements for cryptocurrencies. 2021 started off where 2020 left off. Mainstream adoption, the DeFi boom, and the recent craze in NFTs have all contributed to the mammoth rally that we have seen in digital assets for the past 12 months. Bitcoin (BTC), the pioneer and the most well-known cryptocurrency has played a major role in making digital assets an established phenomenon. No wonder that more than half of the total market cap of cryptos comes from BTC.
BTC dominance basically highlights the market share of Bitcoin over the total market cap of the digital assets. The current figure of BTC dominance stands around 55.1%, at the time of publishing. This is down from the recent 2.5 year high of almost 70% that we saw in January of this year. The premier coin has such an influence over the crypto market that it dominates the price moves.
And this has been pretty visible in the post-pandemic boom that started off in late March 2020. The out-sized gains by Bitcoin beat all the other digital currencies by a long margin and that is why the BTC dominance mostly stayed in the 65–70% range during 2020, before peaking in Jan. 2021. Although Bitcoin has hit an all-time high of around $62k earlier in March, it has had a tough time beating it.
And this has given the opportunity to Alt. coins to shine. Led by Ethereuem, the top coins in this category are beginning to post some handsome gains. Even Ripple’s XRP, which had been severely battered by the SEC lawsuit earlier, has jumped more than 80% in the last week alone. The money pouring into this segment of the crypto market has enabled the total market cap to post another record of $2 trillion in market cap.
Coming back to the BTC dominance, if we look at the chart of this metric going all the way back to Jul. 2013, it seems that it is in a long-term downward trend (chart above). For the first few years (2013–2016), Bitcoin had very few contemporaries to contend with and that’s why its dominance was somewhere between 80–90%.
2017 saw the advent of the ICO (Initial coin offering) boom, which also resulted in the first bubble for the crypto market that we saw peak in December of the same year. The impact of the ICO boom was such that by Jul. 2017, BTC dominance had dropped from around 85% to just below 40%. This was the time when a whole universe of alt. coins emerged.
From Jul. 2017 to Dec. 2017 Bitcoin saw an exponential rise in prices, which helped it revive its dominance to around 60%. The launch of BTC futures launch coincided with this peak, which also started the long bear market for the cryptos. As Bitcoin plunged, so did its dominance — posting an all-time low around 35% in Jan. 2018. The Alt. coins were still faring a little better, but then the long dark alley of the bear market ensued.
And so did the slow climb of BTC dominance. Traditionally speaking, Bitcoin has fared better during bear market runs since people prefer staying vested in the premier digital currency rather than the more risky alt. coins. The failure of a lot of the latter also contributed towards the gain in BTC dominance that we saw post-2017.
As we enter the second quarter of 2021, the risk appetite for Bitcoin seems to be stalling — at least in the short term. The Alt. coins, on the other hand, are catching up. Over 20% drop in BTC dominance in the last couple of months alone points to a possible Alt. coin season taking shape. Would the long-term downtrend in BTC dominance reinforce itself to a more meaningful drop… time will tell.
Originally Published on Medium