Bitcoin, as the first and most famous cryptocurrency, has been central to the world of digital assets for over a decade. Its market dominance, that is, the share in the total capitalization of all cryptocurrencies, remains significant, despite the emergence of many new and innovative altcoins. In this post, we look at what Bitcoin’s dominance is, why it is so important, and what consequences it has for the crypto industry.
What is Bitcoin Dominance?
Bitcoin dominance is the percentage of bitcoin capitalization to capitalization of all existing cryptocurrencies. This indicator allows you to assess the degree of influence of Bitcoin on the entire digital asset market. If the dominance of Bitcoin is high, this means that most of the funds invested in cryptocurrencies are concentrated in bitcoin, but if the indicator decreases, it is believed that the growth of altcoins relative to BTC is recorded.
Why Does Bitcoin Dominate?
First steps and brand awareness
As the first cryptocurrency, BTC has a significant historical advantage. It has become synonymous with cryptocurrency and the first asset to attract the attention of new investors.
Safety and reliability
Bitcoin blockchain has proven its resistance to attacks and fraud. Thanks to a decentralized network of miners and a high level of security, Bitcoin has become the benchmark for reliability in the cryptocurrency world.
Liquidity
Bitcoin has the highest liquidity among all cryptocurrencies. This means that it is easiest to buy and sell on various exchanges, which attracts all players of the crypto market.
Developed infrastructure
Over time, a powerful infrastructure has developed around Bitcoin – exchanges, wallets, payment systems, investment funds and so on. All this contributes to his dominant position.
Consequences of Bitcoin Dominance
Impact on the altcoin market
When Bitcoin dominance increases, altcoins often lose value relative to Bitcoin. Investors prefer a more stable and proven asset, which may negatively affect new projects.
Market stability
High Bitcoin dominance may indicate greater stability of the crypto market as a whole. During periods of uncertainty, investors often switch to Bitcoin as «digital gold», which helps to maintain the overall capitalization of the market.
Regulatory aspects
Bitcoin is under scrutiny worldwide. Its dominant position can serve as an indicator to regulate the entire cryptocurrency industry, setting standards and rules of the game.
The future of Bitcoin dominance
The future of Bitcoin domination remains a matter of debate among experts. On the one hand, growing interest in decentralized finance (DeFi), new blockchain projects, and innovative cryptocurrencies may reduce Bitcoin’s market share. On the other hand, the growing recognition of Bitcoin as a savings and payment instrument may further strengthen its position.
Regardless of how events unfold, Bitcoin will remain a key player in the cryptocurrency ecosystem. Its dominance is not only an indicator of the current state of the market, but also an important factor that will influence its future development.
Note that, according to Coinmarketcap, the Bitcoin dominance index in July of this year has already reached 53.5%, while the second largest cryptocurrency by capitalization, Ethereum, occupies 17.5% of the cryptocurrency market. For the rest of the market, including other cryptocurrencies, stablecoins account for 29%.
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