How Bitcoin Dominance is a Fool’s Game

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Bitcoin Dominance was at it’s peak (and should be by the fundamentals) in 2016. Since then, it’s been declining and we have seen a rise in altcoins.

I think we need to stop looking at Bitcoin Dominance as a measure of health. What Bitcoin Dominance measures is the ratio of BTC market cap to the rest of the crypto market cap. This number is useful for telling us if money is flowing into BTC or out of BTC into other assets. But that’s all it tells us. It doesn’t tell us which coins are healthy and which aren’t (which is what most people assume). It also doesn’t tell us which coins are overvalued and which are undervalued.

Let’s say there were two assets, one called “A” and one called “B”. A has a very large total value ($1B) but only a small amount of activity ($10k/day). B has a small total value ($10M) but a large amount of activity ($1M/day). Of course, in this hypothetical, these numbers are not reasonable for any asset in the real world. But I’m using them because they’re easier to understand than real numbers. They’re like little toy examples that allow you to understand what math

Bitcoin Dominance is an interesting metric to track, but it is also a very misleading one. It’s a metric that we use to measure the percentage of bitcoin’s market cap as compared to all other cryptocurrencies combined.

Right now, it looks like this:

But what does this mean? Does it mean that bitcoin is “dominating” in the crypto space? Does it mean that the other cryptocurrencies are worthless?


It only means that bitcoin has a higher market cap than all the other cryptos. How much higher? Well, right now, about 70%. If you go back to early 2017, Bitcoin Dominance was about 85%. And if you go back to 2014, 2014 or 2015, Bitcoin’s dominance was 100%. So what does this tell us?

Well, if you’re looking at this chart and thinking that bitcoin’s dominance is heading towards 100% again, then what you’re saying is that cryptocurrency is about to die. But if you do believe that, then why are you even reading this blog? I assume you’re reading this because you think crypto is not going to die. So why would anyone assume that bitcoin’s dominance will become 100% again?

The answer is simply because they have no idea what they’re talking

Bitcoin Dominance is a metric that shows what percentage of the total crypto market cap is made up by Bitcoin. For example, if the market cap of all crypto is $100 billion and Bitcoin’s market cap is $50 billion, then Bitcoin Dominance would be 50%. On its face this makes sense because Bitcoin has historically been the largest crypto asset by market cap and so we can use it as a barometer for the health of the crypto space in general. But while this seems like a good measure, it really isn’t.

The problem with using Bitcoin Dominance to determine how healthy the crypto space is lies in how misleading it can be. Since altcoins are generally smaller than Bitcoin, they tend to rise and fall more rapidly than Bitcoin due to their smaller market caps. This means that altcoin prices will vary more wildly as well as more frequently than that of Bitcoin. So if you’re looking at price charts, even if they’re all flat or dropping together, the chart for an altcoin will look worse than the chart for Bitcoin because it will have more dips and valleys on it.

This means that if you are measuring total market cap across all cryptos and taking into account those varying levels of volatility, a chart tracking total market cap will have more dips and

Bitcoin is a powerful tool for sending value around the world. It is the most popular cryptocurrency, with a market capitalization that’s larger than all other cryptocurrencies combined.

Bitcoin’s dominance ensures it will remain one of the most important assets in the crypto space for years to come. However, this doesn’t mean it is without competition or that its continued growth is guaranteed.

The idea of “Bitcoin Dominance” has been floating around the crypto space for a few years now. As far as I can tell, it originated on Twitter in 2016, when a user named @CryptoHustle first tweeted about it.

However, Bitcoin Dominance has also become a common talking point among crypto influencers, so much so that it has a Wikipedia page dedicated to it. This section aims to explain why Bitcoin Dominance is not a significant factor in determining whether Bitcoin or the crypto market are healthy.

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Bitcoin Dominance is a fool’s game.


At the time of writing, Bitcoin has a 68% market dominance, and therefore, is the biggest cryptocurrency by some margin. Over the last year, as Bitcoin’s price has risen dramatically to almost $20,000 at its peak in December 2017, Bitcoin’s dominance also rose from about 33% to over 60%. Today it stands at 68%. This is not unusual. Historically, when a new money emerges, it usually takes over from its predecessor as the main store of value and unit of account for other assets. The dollar replaced gold as the premier currency after World War II. Gold replaced silver before that. And silver replaced copper and precious metals before that.

So what? So everything! Bitcoin is king again after all! Right? Wrong! In fact, if you are using bitcoin dominance as a measure of anything meaningful you are being very foolish indeed. Let me explain why:

Bitcoin was invented to replace money with code — to create a new form of digital cash which couldn’t

One of the hot topics in cryptoland these days is Bitcoin dominance. Some analysts, commentators and traders are obsessed with it and use it as a gauge for whether the crypto market is healthy or not.

They argue that if Bitcoin’s market share is above 50%, the crypto market is strong. If it’s below 50%, the crypto market is weak.

I beg to differ. I think this approach to analyzing crypto markets is flawed and misleading. Here’s why:

1) The chart many use to make their case looks like this:


The problem with that chart is that it only shows data from 2013 onwards; even then, there were only a few other coins in existence (Litecoin, Namecoin, Peercoin) so Bitcoin’s dominance was already higher than it should have been, by default.

2) That chart also treats all altcoins equally, which makes no sense because each coin has its own unique characteristics and its own audience who are driven by different factors (whether ideological, utilitarian or speculative).

The metric used to determine the health of the crypto space is not just misleading, it’s downright dangerous.

Bitcoin has been under attack for years. In fact, it has been attacked since its inception. Bitcoin detractors have relied on FUD time and time again to try to derail the revolution that is Bitcoin. But the revolutionary idea of Bitcoin has continued to grow and evolve over the last 9 years despite a never ending barrage of attacks from outsiders of all types.

The most recent attack against Bitcoin has come in the form of the ridiculous “Bitcoin Dominance” meme. This meme has been propagated by many self-proclaimed “crypto experts” that are trying to convince people that Bitcoin is dying and altcoins are taking over. This is clearly a lie and one that I will attempt to explain in this article.

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