Tutorial: Understanding Bitcoin Dominance
Introduction |
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Hello friend, how are you doing today? I am so excited to have you here reading through my post, in which I have discussed Bitcoin dominance.
The first cryptocurrency in the world is known as Bitcoin, and it was released to the public in 2009 by a developer or group of developers going by the name Satoshi Nakomoto.
Since then, despite the rise of rival cryptocurrencies, bitcoin has remained the biggest and most valuable cryptocurrency in the world. Today, thousands of new cryptocurrencies, commonly referred to as "alternative coins" or "altcoins," have been created as a result of the underlying technology.
The position of Bitcoin relative to other digital assets continues to be crucial and illustrative of the state of the wider crypto market. Traders and analysts use a ratio known as "Bitcoin Dominance," sometimes abbreviated as "BTC Dominance," to calculate bitcoin's market value in relation to the overall crypto market. In regards to that, let's take a look at what bitcoin dominance is and how it works.
| What is BTC Dominance, and how does BTC Dominance work? |
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The percentage of bitcoin in the overall market value is known as "BTC dominance." It is determined by dividing the market capitalization of Bitcoin by the market capitalization of all other cryptocurrencies, such as Ethereum, Steem, etc.
| Why, then, is it significant? |
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Okay, this is because In the past, traders have used BTC dominance to determine if alternative currencies are trending upwards or downwards in relation to bitcoin. For instance, a common belief is that if altcoin prices are rising, the cryptocurrency market is about to enter a bull market.
Let's consider this also; for instance, in 2017, a major fall in BTC's dominance signaled an increase in altcoin prices (rather than a decline in BTC's price), which coincided with the market's transition into a bull phase.
| From Just Bitcoin to Thousands of Cryptocurrencies |
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After bitcoin was created, the next cryptocurrency, litecoin, was created in 2011, and in 2013, which Forbes magazine dubbed "the year of the bitcoin," the number of additional cryptocurrencies entering the market grew dramatically. By May 2013, the crypto market had at least ten tokens, including Litecoin (LTC) and Ripple's XRP.
In parallel, as more investors learned about the world of digital assets for the first time, the price of bitcoin soared. However, despite having a few new players to contend with, BTC's dominance remained at about 95% during this time.
| The Emergence of Ethereum |
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A group of programmers led by Vitalik Buterin introduced the Ethereum (ETH) network in 2015. As a blockchain that permitted new use cases outside of financial services, such as the transfer of funds, it set out to compete with Bitcoin.
| The Emergence of Steem |
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Ned Scott, a corporate operations and finance expert, and Dan Larimer, a blockchain developer, established Steem in 2016 before it was later sold to Justin Sun, the founder of Tron Network.
Steem originally entered the open market in April 2016, trading at around $0.65 before rising to around $4 in July due to rising interest in the coin. Although, by that time, so many of us hadn't heard about Steemit, thank God we are here today.
| ICO mania |
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From 2017 to 2018, initial coin offerings (ICOs), a popular form of crowdfunding for early-stage cryptocurrency ventures, gained popularity. During this time, there were almost 2000 different ICOs, raising a total of over $10 billion.
Many of the more recent cryptocurrencies that emerged at that time saw money start to migrate from bitcoin into them. While some investors preferred to profit from sharp price volatility, others were more interested in the appealing but unproven use cases.
Bitcoin dominance had its first significant dip as a result of the unusual rise in altcoin competition, falling to an all-time low of about 37% in January 2018, which we also witnessed at the time of the Luna crash.
| A Winter of Cryptocurrency in 2018 |
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The ICO boom was ultimately brief, despite the fact that it had attracted a lot of attention to cryptocurrency. Investors were aware that many initial coin offering (ICO) projects lacked fundamentals or employed dubious business techniques.
Some of these initiatives even came under regulatory scrutiny from American and other authorities. This rise in unfavorable sentiment eventually spread throughout the market, pushing all cryptocurrencies into a protracted period of price drops and stagnation.
To know about cryptocurrency market sentiment, you can read about it in my previous post.
| Recovery of Bitcoin |
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By the closing months of 2018, BTC's dominance had steadily returned to over 50% as a result of the collapse in value of numerous altcoins and the general lack of confidence among investors in ICOs.
By the end of the year, bitcoin was trading at about $7,000. The year's peak for BTC dominance was in September, when it reached about 70%. using digital.
| Conclusion |
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BTC dominance is the way in which other cryptocurrencies share or originate from Bitcoin, which is the first cryptocurrency to be created by a person or group of persons bearing the name Satoshi Nakamoto in 2009.
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