What is Bitcoin dominance? It’s an interesting concept that is worth knowing if you are investing in the crypto market. So here is the explainer about how to use data about Bitcoin to get your head around other aspects of the market.
Bitcoin was the world’s first cryptocurrency, and it remains the most well-known and valuable. And now, of course, thousands of other cryptocurrencies have followed suit and are building up their own communities. So let’s talk about how they all interplay with each other.
Bitcoin dominance is the percentage of the total cryptocurrency market that is made up of Bitcoin. Another way to say it is that it is the total market capitalisation that is held by Bitcoin. Market capitalisation is calculated by multiplying the current price of a cryptocurrency by the total number of coins in circulation. If you’re wondering how to buy bitcoin uk, you can start by choosing a reputable cryptocurrency exchange that supports GBP transactions.
How is Bitcoin dominance calculated?
To calculate Bitcoin dominance, you use the following formula:
Divide the Bitcoin Market Cap by the Total Crypto Market Cap, and then multiply the result by 100.
On the 12 Dec 2024:
The price of Bitcoin was US$100,694.60
The current supply: 19.79M BTC
Total market cap of all crypto: US$3.56 T
Bitcoin Market Cap: US$2 Trillion
Total Cryptocurrency Market Cap: US$3.56 Trillion
Bitcoin Dominance = (Bitcoin Market Cap ÷ Total Cryptocurrency Market Cap) × 100
= (2,000,000,000,000 ÷ 3,560,000,000,000) × 100
= 0.5618 × 100
= 56.18%
So according to these figures, the Bitcoin dominance on 12 December 2024 is 56.18% of the total market cap.
Some context
To provide context, the figure of 56.18% is considered relatively high.
During the early days of cryptocurrency (2013-2015), the dominance of Bitcoin was often over 90%.
In the 2017 crypto bull run, it dropped to around 35-40%. During the 2021 bull market, it fluctuated between 40-50%
56.18% suggests Bitcoin remains the most significant cryptocurrency by market capitalisation.
This level of dominance is higher than the average of recent years, which typically ranged between 40-50%.
Factors influencing dominance
-Increased institutional adoption
-Growing perception of Bitcoin as a store of value
-Highest market capitalisation compared to other cryptocurrencies
-Macro economic conditions.
While 56.18% is considered high in recent historical terms, it’s not unprecedented. The percentage can change rapidly based on market sentiment, regulatory news, technological developments, and overall cryptocurrency market dynamics.
Understanding Bitcoin Dominance
Dominance is a key metric used by investors and analysts to understand market trends and sentiment in the cryptocurrency world. Here are some insights into this:
Market sentiment
A high dominance suggests that investors are favouring Bitcoin over altcoins (alternative cryptocurrencies). This may indicate a risk-averse market sentiment.
Altcoin season
A declining dominance often represents signals of an “altcoin season,” where investors are diversifying into other cryptocurrencies. This typically indicates a belief that altcoins have more room for growth.
Influencing factors
Several factors can influence Bitcoin dominance. Positive or negative news coverage of Bitcoin can influence dominance.
Innovations in Bitcoin, such as the Lightning Network for faster transactions, can strengthen its position. Similarly, advancements in other cryptocurrencies can challenge Bitcoin’s dominance.
Government regulations and policies can influence investor confidence.
Increased investment from institutional investors can boost Bitcoin’s market cap and dominance.
Historical trends
Bitcoin’s dominance has fluctuated significantly throughout its history. In the early years, it held close to 100% dominance. However, as the cryptocurrency market expanded and new altcoins emerged, Bitcoin’s dominance gradually decreased.
It has experienced periods of both high and low dominance, reflecting changing market dynamics and investor sentiment.
Bitcoin’s dominance is a crucial indicator of market sentiment and trends in the cryptocurrency space. Understanding some of the factors involved in Bitcoin’s dominance can provide additional context for understanding cryptocurrency trends.”
The cryptocurrency market is constantly evolving, so staying updated on the factors influencing Bitcoin dominance is essential.
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