YAsin video 1 : A Brief History of Bitcoin Dominance

 In This video, we will talk about A Brief History of Bitcoin Dominance.




Bitcoin dominance is the share of the original cryptocurrency, BTC, in the entire crypto market’s capitalization. For quite some time since its inception in 2009, bitcoin remained the only digital asset in existence and thus, naturally, solely accounted for all the crypto market’s capitalization. However, over time, things started to change. The year 2013 saw the first wave of altcoins that added their value to the crypto market cap’s formula. 2015 was the birth of Ethereum — Bitcoin’s closest rival that spawned the currency ether — and then, in 2017, the ICO boom resulted in BTC dominance further diluted and hitting an all-time low, only to recover to above 50% in a few months. Today, BTC dominance faces its heaviest competition in DeFi, NFT, and metaverse tokens, and over 20,000 non-bitcoin cryptocurrencies.


Introduction

Bitcoin, the world’s first cryptocurrency, was launched to the public in 2009 by an anonymous developer or group of developers known as Satoshi Nakamoto. Since then, despite the emergence of competition, bitcoin has remained the world's largest and most valuable cryptocurrency. Its underlying technology has also inspired the development of thousands of new cryptocurrencies collectively known as alternative coins, or altcoins. 


Bitcoin’s standing against the rest of digital assets continues to be hugely important and indicative of the state of the overall crypto market. To measure bitcoin’s market cap relative to the larger crypto market, traders and analysts use a ratio called bitcoin dominance, also known as BTC dominance.




What is BTC Dominance?

BTC dominance is the share of bitcoin in the crypto market’s overall value. It is calculated by dividing BTC’s market cap by the total cryptocurrency market cap. 


But why is it important? Historically, traders have used BTC dominance to help understand whether altcoins are on an up or downtrend against bitcoin. For example, one popular theory is that the crypto market is heading into a bull market if altcoins are trending up. In 2017, for instance, a significant decline in BTC dominance signaled altcoin prices skyrocketing (rather than BTC price declining), coinciding with the entire market entering a bull phase.


From One Cryptocurrency to Thousands

In 2011, the first altcoin, litecoin, was born, and in 2013 — dubbed “the year of the bitcoin” by Forbes magazine — the number of new altcoins entering the market began to rise quickly. By May 2013, the crypto market counted at least ten tokens, including litecoin (LTC) and Ripple’s XRP. 


Concurrently, bitcoin’s price skyrocketed as more investors discovered the digital asset space for the first time. Yet, even with a few newcomers to compete against, BTC's dominance remained at around 95% during this period. 


The birth of Ethereum

In 2015, Vitalik Buterin and a team of developers launched the Ethereum (ETH) network. It set to rival Bitcoin as a blockchain that allowed more use cases beyond financial services like the transfer of money. Unfazed by the competition in Ethereum’s native token, ether (ETH), bitcoin continued to account for around 90-95% of the crypto market. Things only started to change in 2017 — the start of the initial coin offering (ICO) boom.


ICO fever 

Initial coin offerings (ICOs), a popular crowdfunding method for early-stage crypto projects, became a prominent trend from 2017 to 2018. There were around 2000 unique ICOs during this period, with over $10 billion raised cumulatively. Funds began flowing from bitcoin into many of the newer altcoins that surfaced at that time. Some investors believed in the compelling, yet unproven, use cases, while some were more interested in profiting off dramatic price swings. 


The unprecedented influx of altcoin competition resulted in bitcoin dominance experiencing its first major decline, dropping to an all-time low of around 37% in January 2018. 


2018’s crypto winter

While it had generated considerable attention toward crypto, the ICO boom was ultimately short-lived. Investors realized that many ICO projects lacked core fundamentals or had questionable business practices. Some projects even became the target of regulatory scrutiny by the U.S. and other authorities. This increase in negative sentiment eventually overtook the industry, sending the entire crypto market into a prolonged period of price decline and stagnation.


Bitcoin’s recovery

With many altcoins’ value tanking and investors’ general disillusionment in ICOs, BTC dominance gradually climbed back to over 50% by the final months of 2018. 



In 2019, bitcoin’s price experienced a slight resurgence, trading at around $7,000 by the end of the year, while BTC dominance peaked at about 70% in September. The digital asset, however, would remain relatively still until the COVID-19 pandemic struck the world in 2020.



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