Bitcoin dominance and altcoin dominance are market cap-based metrics that quantify the percentage of the total crypto market controlled by Bitcoin versus alternative cryptocurrencies. Analyzing these dominance ratios over time provides insights into shifting trends.
What Does Bitcoin Dominance Represent?
Bitcoin dominance measures Bitcoin’s market capitalization as a percentage of the entire global crypto market cap. For example, a 65% Bitcoin dominance indicates Bitcoin comprises 65% of the total crypto market value.
Historically, Bitcoin accounted from 50% to even 90%+ dominance in the early years. This reflected its status as the pioneering crypto asset before altcoins emerged.
Historical Bitcoin Dominance Ratios
Looking back over Bitcoin’s history, its market dominance has fluctuated dramatically as the cryptoasset landscape evolved:
- 2010-2013 — Bitcoin enjoyed 90%+ dominance as the sole major cryptocurrency after inception.
- 2014-2017 — Bitcoin dominance declined to 35-50% as Ethereum and a wave of altcoins emerged and gained traction.
- 2018-2020 — Dominance rebounded back above 60% after the 2017 ICO boom went bust and interest refocused on Bitcoin and larger caps.
- 2021 — Present — Bitcoin dominance has hovered around 40-50% as institutional inflows increased diversity and DeFi fueled use cases for altcoins and stablecoins.
This historical context illustrates the cyclical shifts between Bitcoin’s standing as the core digital store of value and speculative hype around the latest altcoin trends. Analyzing past dominance ratios provides helpful perspective on current market psychology.
Calculating Bitcoin Dominance
The formula for Bitcoin dominance is simply:
Bitcoin Dominance = (Bitcoin Market Cap / Total Crypto Market Cap) x 100
This metric has fluctuated widely over the years as investor focus shifts between Bitcoin and the expanding altcoin universe. Periods of rising Bitcoin dominance signify belief in its credentials as the core crypto store of value and hedge against altcoin volatility.
Interpreting Changes in Bitcoin Dominance
Trends in Bitcoin dominance offer insights into prevailing crypto market sentiment:
- A rising dominance indicates a focus on Bitcoin’s tried-and-tested value.
- A falling share signals increased investor appetite for speculative altcoins.
- Sudden swings reflect pivotal macro events reshaping narratives.
Understanding these trends allows traders to contextualize and evaluate fluctuations in altcoin prices relative to Bitcoin.
Calculating Altcoin Dominance
Altcoin dominance represents the percentage of total crypto market cap made up by alternative coins like Ethereum, XRP, Solana etc. The formula is:
Altcoin Dominance = (Total Altcoin Market Cap / Total Crypto Market Cap) x 100
For example, if Bitcoin dominance is 65%, then altcoin dominance would be 100% — 65% = 35%. The two should sum to 100%.
Altcoin dominance rising above 35-40% tends to signal a broader openness to assets beyond just Bitcoin for their perceived technological value.
Analyzing Altcoin Market Cycles
Trends in altcoin dominance exhibit characteristic market cycles:
- Dominance crashes during bear markets as risky altcoins get sold off indiscriminately.
- Dominance rebounds during bull runs as investors flock back to high-upside potential alts.
- Sudden altcoin dominance spikes reflect hype-driven manias around specific assets.
Carefully tracking altcoin dominance patterns allows traders to better understand, contextualize, and forecast market-wide altcoin price movements.
To summarize, analyzing the Bitcoin and altcoin dominance percentages provides helpful context around the cyclical swings between belief in Bitcoin’s enduring value proposition versus speculative fervor for new altcoin projects and paradigms. Observing these dominance metric trends allows deeper insights into overall market psychology and cycles.