A Brief History of Bitcoin Dominance

A Brief History of Bitcoin Dominance
A Brief History of Bitcoin Dominance

What Is Bitcoin Dominance? Know its rise and fall

What Is Bitcoin Dominance? One of the most prominent cryptocurrencies in the world, Bitcoin, has been considered a dominant player in the field of the digital currency market. The market capitalization of the blockchain technology-based Bitcoin, or the total value of all the bitcoins, is certainly larger than that of any other cryptocurrency.

It is said to have accounted for most of the total value of the entire cryptocurrency market. However, the concept of ‘bitcoin dominance’ has been more definite than simply looking at market capitalization. In this blog, we will discuss various factors that contribute to bitcoin’s dominance and try to find out how it has evolved over time. 

Before we proceed further and try to understand what Bitcoin Dominance is, let’s find out what Crypto Market Capitalization is. Market capitalization, which is usually referred to as “market cap”, is a metric that is used to find out the total value of a company or a cryptocurrency. For instance, if a company is having over 1 million outstanding shares and the current price per share is around $100, then the market cap of the company becomes $100 million.

In terms of cryptocurrency, market capitalization is deliberated by increasing the circulation of the total number of coins by the current market price of the coin. It is pertinent to mention that Market capitalization is used to measure the size of a significant cryptocurrency and to compare it to others in the market.

It is worth mentioning that a coin with a higher market cap is usually considered more valuable than a coin with a lower market cap. 

What Is Bitcoin Dominance? 

What Is Bitcoin Dominance
What Is Bitcoin Dominance

Bitcoin dominance is said to be a metric that is used to measure the percentage of the total cryptocurrency market capitalization. It is represented by the value of bitcoins in circulation. It is usually “described as the ratio between the market cap of Bitcoin and the remaining cryptocurrency markets. 

It is used as a way to measure the strength of the Bitcoin network besides its position in the cryptocurrency market. The higher the bitcoin dominance is; the more valuable bitcoin is as compared to the other cryptocurrencies. Several experts believe that Bitcoin’s dominance can turn out to be very useful in an order to track the evolution of the crypto market, besides, to understand the influence of Bitcoin in the market. 

It also provides an idea of the whole sentiment toward the cryptocurrency market. For instance, if Bitcoin’s dominance is said to be high, it may indicate that investors are foreseeing Bitcoin as a store of value. On the other hand, if Bitcoin’s dominance is low, it may show a preference for alternative cryptocurrencies.

Evolution of Bitcoin 

Evolution of Bitcoin
Evolution of Bitcoin

It may be recalled that Bitcoin was established in 2009 by an unknown individual or a group of individuals with the help of the pseudonym Satoshi Nakamoto. The idea was to create a decentralized, digital alternative to traditional currencies in an order to be free from government control and manipulation.

Notably, the first bitcoins were mined with help of a process known as “proof of work”. In this case, the miners solve complicated equations through powerful computers in an order to validate the transactions and add new bitcoins to the blockchain technology-based network. 

In the initial days of bitcoin, only a few other cryptocurrencies existed, and thus, the market for such currencies was relatively small. This provided bitcoin with a significant first-mover advantage because of its ability to establish itself as the go-to digital currency for those who were looking to buy and sell goods and services online.

Soon after people started showing interest in bitcoin, its value started to grow, and in no time, it turned out to be the most valuable cryptocurrency in the world.

Bitcoin Dominance in its initial years 

Bitcoin Dominance in its initial years
Bitcoin Dominance in its initial years

In the initial stage of bitcoin, its dominance in the cryptocurrency market was almost complete. In 2011, for instance, bitcoin was said to be around 95 percent of the total market capitalization of all cryptocurrencies. It was dominating the cryptocurrency market because of the combination of factors, such as the first-mover advantage, as mentioned earlier, besides a lack of competition.

In addition to this, the market’s small size and the lack of regulatory oversight made it a bit easy for early users to collect large amounts of bitcoin, thereby establishing their dominance within the market.

Likewise, a lot of people started showing their keen interest in bitcoin and as soon as it started to happen, people began buying and trading Bitcoin. Thus, the value of the Bitcoin currency kept increasing. This further contributed to the strengthening of bitcoin’s position as one of the dominant players in the market.

Later, people started to see Bitcoin as a “safe” investment and that led to the rise of its value over time. However, the early years of bitcoin were stated to be a degree of volatility and speculation, and it contributed to its dominance during this period.

Bitcoin’s Dominance affected 

After a few years, a lot of cryptocurrencies came into existence, thereby, the market started to grow for them. In the meanwhile, the “altcoins”, referred to as the “alternative coins”, were established to address other use cases and solve various problems than bitcoin. Likewise, most of the altcoins had distinct technical features that made them unique from the original cryptocurrency. 

The emergence of such altcoins started to affect bitcoin’s dominance of the market. The rise of Ethereum and the ERC-20 token standard is said to be mainly responsible for the same. Earlier in 2013, the market capitalization of bitcoin is still considered for over 80 percent of the total value of all cryptocurrencies. However, the numbers fell to around 40 percent by 2017.

The fall in bitcoin’s dominance was said to be because of several factors, such as the growing popularity and the emergence of altcoins besides the introduction of new technologies like smart contracts and decentralized applications.

In addition to this, the rising regulatory scrutiny of cryptocurrencies, especially in the United States, led to a fall in the overall market capitalization of cryptocurrencies. Therefore, the percentage of the total market capitalization, represented by the blockchain technology-based bitcoin, decreased simultaneously. 

Apart from these, experts believe that there have been several other features that contributed to Bitcoin’s dominance. One of the most dominant cryptocurrencies in its time, started to face the heat as the competition came with several innovative use cases. These factors may include Hard forks, which were used to create a new, separate version of the blockchain. Likewise, the pre-mined coins and bull and bear markets may also have affected Bitcoin’s dominance. 

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