There may be thousands of projects in crypto but there’s only one Bitcoin. Bitcoin is the first and largest blockchain project. And there’s a measure of market activity about Bitcoin we are going to look at today. Bitcoin Dominance.
How Bitcoin Dominance Works?
Bitcoin dominance measures how dominant Bitcoin is in the whole crypto market. The way we measure it is one of 2 ways. Either:
- The market cap of Bitcoin/The market cap of the entire crypto market OR
- The market cap of Bitcoin/The market cap of the entire crypto market. BUT not including stablecoins
Why do you think some exclude stablecoins?
Stablecoins don’t act like a blockchain project. Collateral backs them. Then an issuer like Tether, Circle, or Paxos issues the stablecoin. The 3 mentioned here issue USDT, USDC, and BUSD.
So some feel it’s more accurate to exclude them. Because they are not producing blocks or verifying transactions that create new coins. But then others say stablecoins play an important industry role, so we should include them.
What Is the Current Bitcoin Dominance?
And the dominance is a percentage. Let’s take a look today based on numbers from our friends at CoinGecko.
- Bitcoin’s market cap is $388.8 billion
- The total crypto market cap is $1.04 trillion
So our Bitcoin dominance is 388.8/1.04 trillion or 37.4%.
Now let’s try it less the stablecoins
Right now, the stablecoin market value is $154 billion. So if we take that away from the total market cap of $1.04 trillion, we get $886 billion.
Calculate again and our BTC Dominance is 388.8/886 or 43.8%. So just a little higher without the stablecoins.
Why is Bitcoin Dominance Important?
Good question. It’s important for a couple of reasons. First, Bitcoin is the leading project in the industry so we want to see how it is doing. Second, it’s a general measure of how well the altcoin market is doing. Not specific alt projects like your favorite pet project, but ALL alts.
Think about it for a second. There are thousands of projects but only 1 Bitcoin. So if the industry is growing faster than Bitcoin is, the total industry figure (the denominator), will grow faster than Bitcoin does (the numerator). And this means Bitcoin dominance falls. As you see here….
Why BTC Dominance Increase?
And as the opposite of what we just discussed, if Bitcoin is growing faster than the total market as a whole, then Bitcoin is doing better than alts. The numerator rises while the denominator rises by less or even falls making Bitcoin dominance increase.
So if you are looking for a quick measure of whether the altcoin market is healthy or not, then give Bitcoin dominance a look. It combined with other tools will help you figure out market health and if this is a good time to invest new funds or not.
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