CoinMarketCap has been recording the percentage market share of Bitcoin and other major cryptocurrencies, referred to as the dominance percentage, since mid-2013. According to this data, Bitcoin has always had the biggest market cap compared to all other cryptocurrencies by far but throughout time, its dominance percentage has been changing. The evolution of this reveals important trends in the crypto space, including the rise of decentralized apps and ICOs, and also suggests that a big Bitcoin rally might be beginning.
In 2013, Bitcoin had a dominance percentage of 90-96%, with Litecoin and Ripple comprising most of the rest of the total cryptocurrency market cap. The first big hit to Bitcoin’s dominance percentage occurred in December 2014 when it declined to 79% as Ripple rose to 14%. This coincided with the major rally that pushed Bitcoin’s price above USD 1,000 for the first time.
Bitcoin’s dominance percentage slowly recovered after this to 91% by the beginning of 2016, before sharply declining to 80% by March 2016 as Ethereum gained popularity. Ethereum’s dominance percentage peaked around 12% during this time. Ethereum became popular because it was the first widely-used platform to integrate blockchain smart contracts, which can be used to develop decentralized apps.
Bitcoin’s dominance percentage recovered a little from Ethereum’s initial burst of popularity and hit 86% in February 2017. At the same time, Ethereum’s dominance percentage was at 5%. Then, Ethereum’s popularity skyrocketed and by June 2017, Bitcoin’s dominance percentage dwindled to 38% while Ethereum’s dominance percentage rose to 32%. This was the closest any cryptocurrency had gotten to dethroning Bitcoin as the cryptocurrency with the largest market cap.
The biggest Bitcoin rally in history was underway by June 2017. Clearly, investors trying to get in at this time chose Bitcoin over other cryptocurrencies as Bitcoin’s dominance percentage increased to 65% in December 2017 while price climbed past USD 10,000. Simultaneously, Ethereum’s dominance percentage declined to 10%.
The price of Bitcoin then crashed to as low as USD 6,000 in January 2018, and Bitcoin’s dominance percentage declined sharply as well to 33%. Ethereum’s dominance percentage increased back up to 20%, but the more important trend was that other alternative cryptocurrencies reached an all-time high dominance percentage of 25%. This rise probably represents the explosive growth of initial coin offerings (ICOs).
Bitcoin’s dominance percentage recovered to 45% by April 2018, and then declined to 36% during the rally from USD 6,800 to nearly USD 10,000 that peaked in early May. Since then, Bitcoin’s dominance percentage has been slowly rising and is back to 45% as of this writing on 22 July 2018. Ethereum’s dominance percentage has been oscillating between 15% and 20% during 2018 so far, with other cryptocurrencies hovering between 20-25%.
The recent Bitcoin rally from USD 6,200 to USD 7,500 has corresponded with a steady rise in dominance percentage while Ethereum’s and other cryptocurrencies’ dominance percentages have declined to 17% and 22% respectively. This suggests that fresh crypto investment is favoring Bitcoin, and might suggest that it is coming from institutional investors, since Bitcoin has the most liquidity and is, therefore, the best option for the large trades institutional investors require.
Based on the data from the 2017 rally, an increasing Bitcoin dominance percentage, combined with increasing Bitcoin price like we are seeing in July 2018, is a favorable setup for a major Bitcoin rally. The rally in April 2018 was not favorable because Bitcoin’s dominance percentage was declining, indicating the rally was led by other cryptocurrencies associated with ICOs.
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