Bitcoin dominance – the proportion of total crypto market cap occupied by bitcoin – has hit 50% again.
It’s the first time bitcoin dominance has been above 50% in 2018. The last time it was above 50% was December 2017. However, back at the beginning of 2017, BTC dominance was around 85%. It had rarely dipped below 80% in the whole history of crypto.
Bitcoin maximalists love to talk about BTC dominance. The thinking goes that bitcoin is best, and every use case for alts can and should move to bitcoin in one way or another. Thus ‘dominance’ is the best metric for the success of bitcoin: for bitcoin to succeed, everything else must fail.
This is a ridiculous viewpoint, for more than one reason.
- It’s classic zero-sum thinking. Crypto isn’t competing against crypto, it’s competing against fiat.
- Bitcoin can still be incredibly useful and important – and 100 times its current market cap – and still have less than 50% overall market share, or even 10%.
- As the number of altcoins increases, and the number of crypto tokens used by businesses for many and various purposes, the market cap of non-bitcoin crypto will inevitably increase. A million tiny but genuinely useful projects with $1 million valuation is a trillion dollars. None of these threaten bitcoin. Collectively, they don’t indicate bitcoin is less valuable either.
- These ‘alts’ include tokens like Tether, TrueUSD and other fiat-backed cryptos that add to market cap but don’t compete with bitcoin. As the ecosystem grows, so will the proportion of market cap occupied by stablecoins. That actually reflects demand for bitcoin, while reducing dominance.
- Blockchain applications and tokens do a lot of different things. A LOT. They’re not all money, or a store of value – digital gold – like bitcoin. They don’t compete for bitcoin’s #1 use case.
In the future, the best case scenario would be for bitcoin to be the largest crypto – by some significant multiple, whether that’s 10x or 100x – but to occupy far less than 50% of overall market cap.
TL;DR Dominance is a terrible metric of success. Ratio of #1:#2 crypto is a better one.
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