2023-11-22 14:09:04
Bitconi’s market dominance has always been examined as a measure of the current state of the market. Currently, this indicator is the highest in recent years, at 51%. However, market analyzes show that this data should not really be overestimated, especially if we examine the dynamics of the crypto markets as a whole. This is how the Bitcoin dominance metric should be interpreted The largest cryptocurrency itself, Bitcoin’s dominance shows how much BTC has in the market capitalization of all cryptocurrencies. While at first glance this would reflect Bitcoin’s market power, in reality the metric largely reflects trading activity between Bitcoin and Ether, the second largest cryptocurrency. This dynamic can distort the metric presented above, especially if, say, there are larger fluctuations in the ETH/BTC trading pair. By the way, Ethereum’s market share has been stable around 17% for years, and the diagram below shows the inverse relationship between BTC dominance and the movement of the ETH/BTC pair. The interpretation of the Bitcoin dominance metric is also not easy because, for example, there is the USDT stablecoin, which has a market share of 6.3%. And whose market capitalization change is often not the result of cryptocurrency market activity. For example, when we talk about the inflow of funds in dollars. Therefore, the market capitalization of stablecoins does not reflect the investment itself, but the preparedness of investors to cover their crypto market exposure, for example. Of course, the metric in itself still means something, for example, with the exception of BTC, ETH, USDT, all other cryptos fell by 10% and now stand at only 25% compared to last year. In 2023, Bitcoin dominance changed continuously, as, for example, the ETC/BTC pair changed after, say, the Shapella Ethereum upgrade. Therefore, this indicator can only provide some kind of real picture of the situation when examined together with other market metrics.
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