Bitcoin dominance refers to Bitcoin’s market capitalization superiority over any other cryptocurrency. This is the ratio of Bitcoin’s market capitalization to the overall cryptocurrency market. This ratio is expressed as a percentage. How high Bitcoin’s dominance percentage is tells us how dominant Bitcoin is in the cryptocurrency market. In this article, we will be addressing the question “What is Bitcoin dominance?” in a comprehensive way.
What is Bitcoin Dominance?
In fact, dominance is a general concept, meaning the ratio of a cryptocurrency’s market capitalization to the value of the overall cryptocurrency market. Now that we have briefly summarized this term, we can focus our article on Bitcoin dominance.
The fact that Bitcoin was the first cryptocurrency makes it stand out and lead all cryptocurrencies. In this sense, the market capitalization of any cryptocurrency is nowhere near that of Bitcoin. In terms of market capitalization, the gap between Bitcoin and its closest competitor, Ethereum, is more than 50%. If you ask anyone around us, “What is the first cryptocurrency that comes to your mind?”, the answer will most likely be “Bitcoin”. When all this is brought together, the concept of Bitcoin dominance emerges.
In its simplest form, Bitcoin dominance is a data that expresses the dominance of Bitcoin over all kinds of cryptocurrencies. Looking at this data, Bitcoin’s dominance in the market can be clearly seen.
How Bitcoin Dominance Rises or Falls
The increase in transaction volume as more users invest in Bitcoin and the higher demand for altcoins to support this can be shown as the main 2 reasons for Bitcoin’s increasing dominance in the market. To date, it has been seen that the cryptocurrency market is largely driven by Bitcoin. A strong reason for this is that users are shifting their investments in cryptocurrency assets that they would consider risky at the time to Bitcoin. The realization of the opposite transactions may also be the answer to the question “How does Bitcoin dominance fall?”.
The following equation can be used to calculate Bitcoin dominance:
Bitcoin Percentage Market Cap Ratio ÷ Total Crypto Market Cap Ratio = Bitcoin Dominance
What Happens If Bitcoin Dominance Rises?
If Bitcoin dominance rises, the value of other cryptocurrencies in the market will fall. Because what this development is really causing is that altcoin investors are turning to Bitcoin. If Bitcoin dominance is high and Bitcoin price falls, this could lead to sharp downward movements in altcoins. The continuation of this development may simultaneously increase the severity of the tremor in altcoins.
What Happens If Bitcoin Dominance Declines?
As investors turn to altcoins, Bitcoin’s dominance of the market is also declining. It is possible for Bitcoin to increase in price during periods of low market dominance. If such a situation occurs, altcoins may experience serious price increases. Investors’ preference for altcoins over Bitcoin would lead to this development.
Bitcoin Dominance and Its Impact on Altcoins
The Bitcoin dominance index shows the share of Bitcoin among other cryptocurrencies. Bitcoin has been the most in-demand cryptocurrency in the cryptocurrency market since 2009. Although there are many cryptocurrencies on the market and new ones are added to this number every day, it has not been able to approach or surpass Bitcoin in terms of market dominance. However, with the development of the cryptocurrency industry and the increasing number of altcoins, the dominance of Bitcoin is decreasing.
What Factors Affect Bitcoin Dominance?
One of the main factors influencing Bitcoin’s growing market dominance is that it attracts more investors and therefore more demand than other cryptocurrencies. This increases the trading volume in Bitcoin and the price rises. It would not be wrong to say that the cryptocurrency market is largely driven by Bitcoin. Bitcoin’s growing dominance can be explained by the high demand from investors, who are abandoning their investments in cryptocurrencies that are low in volume and relatively high in risk in favor of Bitcoin.
An increase in Bitcoin’s market dominance means that other cryptocurrencies are outflowing money and falling in value. During periods of high Bitcoin market dominance, price changes on the Bitcoin side affect all cryptocurrencies. Looking at the previous data, it can be seen that the fall in Bitcoin’s price at a time when Bitcoin dominated the market can be seen to have significantly lowered the prices of other cryptocurrencies. Due to Bitcoin’s dominance in the market, downward price movements in Bitcoin are likely to increase the depth of the decline in other cryptocurrencies.
Since 2013, Bitcoin’s market dominance has changed frequently. Bitcoin had over 96% dominance in 2013. The popularization of Ethereum in 2017 and its overwhelming popularity among investors led to a sharp decline in Bitcoin’s market dominance. This rate, which was 87% in January, decreased to 37% within six months, causing one of the lowest dominance rates in Bitcoin history. On June 19, 2016, Ethereum’s market dominance was 32% and Bitcoin’s was 37%.
Here are some other important factors influencing Bitcoin’s dominance. For a better understanding of the concept of Bitcoin dominance, it is useful to look at these articles.
Demand and Supply Balance:
Bitcoin’s price varies depending on the balance of supply and demand. When demand increases, the price rises, while when demand decreases, the price falls.
Adoption and Use:
The more widely Bitcoin is used by individuals and institutions, the more it will dominate the market.
Investor Interest:
Bitcoin is heavily influenced by investor interest. The demand for Bitcoin depends on factors such as investors’ price expectations, security concerns, and market sentiment.
Technical Superiority:
Bitcoin has a well-established and secure technological infrastructure that cannot be imitated by other cryptocurrencies. This makes it unique and supports its leadership in the market.
Regulations:
Governments and financial institutions can impose regulations on digital assets such as Bitcoin. Regulations can affect the acceptance, adoption and price of Bitcoin. For example, if Bitcoin is banned or restricted by a country, this could have a negative impact on its price.
Security and Technology Development:
Security breaches, theft or attacks can reduce confidence in Bitcoin and affect the price. Likewise, advancements in Bitcoin technology, innovations and improvements to address scalability issues could have a positive impact on the price by increasing the availability of Bitcoin.
Global Economic Situation and Geopolitical Factors:
Bitcoin may experience price fluctuations in connection with the global economic situation and geopolitical events. For example, in times of economic uncertainty or financial crises, investors may turn to Bitcoin as a safe haven, which can boost the price. In addition, geopolitical factors such as trade tensions between countries, political conflicts or changes in economic policies can also affect the price of Bitcoin.
Market Capitalization:
Bitcoin has the highest market capitalization, making it a leading player on the stage.
Each of these factors can affect Bitcoin’s dominance and cause price fluctuations. Due to Bitcoin’s volatile nature, it is difficult to predict future price movements, and Bitcoin is dependent on a complex ecosystem of many different factors.
How Bitcoin Dominance Affects the Market
Bitcoin’s market dominance can drop sharply during periods when other cryptocurrencies become more prominent and popular. Periods of increased altcoin dominance and trading volumes and less demand for Bitcoin “
alt coin season
” it is called. Although market dominance data alone is not sufficient for investors to determine their trading strategies, it can provide insight into the future of the market.
Where to Look at Bitcoin Dominance Data?
Bitcoin dominance data is not fixed and changes every second of every moment. If this data is also used in the transactions to be carried out, it should be kept up to date in this sense. For up-to-date Bitcoin dominance data, please refer to www.tradingview.com. You can click here now and follow Bitcoin dominance data live.