What is Bitcoin Dominance?
The meaning of Bitcoin dominance refers to a metric that measures the market share of Bitcoin compared to other cryptocurrencies. It is calculated as the percentage of the total market capitalization of all cryptocurrencies that is held by Bitcoin. The market capitalization of a cryptocurrency is the total value of all coins in circulation, and it is calculated by multiplying the price of a coin by the number of coins in circulation.
Bitcoin dominance is used as an indicator of the overall health of the cryptocurrency market. If Bitcoin dominance is high, it indicates that the market is dominated by Bitcoin and other cryptocurrencies are playing a smaller role. On the other hand, if Bitcoin dominance is low, it indicates that other cryptocurrencies are gaining market share and becoming more prominent.
The market share of Bitcoin has been declining in recent years as more and more cryptocurrencies have entered the market. This decline in dominance has been seen as a sign of the maturity and growth of the overall cryptocurrency market, as investors become more confident in other cryptocurrencies and diversify their portfolios.
However, Bitcoin dominance remains an important metric to watch, as it is still widely considered the benchmark for the cryptocurrency market. A sudden increase in Bitcoin dominance can indicate a shift in investor sentiment and may be a sign of a market trend.
Simplified Example
Bitcoin dominance can be compared to a king's dominance over his kingdom. Just as a king's dominance indicates his control and influence over a kingdom, Bitcoin dominance indicates its control and influence over the cryptocurrency market. It is a measure of the percentage of the total market capitalization that is held by Bitcoin. If Bitcoin has a high dominance, it means that it has a larger share of the total market compared to other cryptocurrencies. In short, Bitcoin dominance can be thought of as a measure of Bitcoin's control and influence over the cryptocurrency market, similar to a king's dominance over his kingdom.
History of the Term Bitcoin Dominance
Bitcoin Dominance emerged in 2013 as a metric to gauge Bitcoin's market share within the broader cryptocurrency realm. It initially quantified Bitcoin's dominance over the entire crypto market capitalization. The metric assessed Bitcoin's share relative to other cryptocurrencies, showcasing its prominence and influence. Over time, this metric became pivotal in assessing market trends and shifts, especially during periods of altcoin surges and declines. As the crypto space evolved, so did Bitcoin Dominance, serving as a vital tool for investors and analysts to interpret and understand the changing dynamics of the cryptocurrency market.
Examples
Market capitalization dominance: Market capitalization dominance refers to the percentage of the total market capitalization of all cryptocurrencies that is accounted for by a specific cryptocurrency. Similar to bitcoin dominance, it is a measure of the relative size and influence of a particular cryptocurrency in the overall cryptocurrency market. Market capitalization dominance is often used as a metric to compare the relative popularity and market share of different cryptocurrencies.
Trading volume dominance: Trading volume dominance refers to the percentage of the total trading volume of all cryptocurrencies that is accounted for by a specific cryptocurrency. Trading volume is a measure of the total amount of a cryptocurrency that is traded on exchanges within a specific period of time. Trading volume dominance can be used to gauge the relative liquidity and trading activity of a particular cryptocurrency.
Mining dominance: Mining dominance refers to the percentage of the total computing power (hash rate) of all cryptocurrency mining that is accounted for by a specific cryptocurrency. Similar to bitcoin dominance, it is a measure of the relative security and influence of a particular cryptocurrency in the overall cryptocurrency ecosystem. Mining dominance is often used as a metric to compare the relative level of network security and decentralization of different cryptocurrencies.
Related terms
Dominance: In cryptocurrency, dominance refers to the market share of a particular cryptocurrency compared to the total market capitalization of all cryptocurrencies.
Liquid Market: The meaning of liquid market, sometimes called the perfect market, refers to an idealized economic concept wherein all participants in a given industry have equal access to information and pricing.