Bitcoin’s price has been rising steadily throughout 2016 and Q1 of 2017 amassing a record market capitalization of $25.5 billion USD. However, many other cryptocurrency markets are growing in value and bitcoin has lost more than 30 percent of its market share over the past four months.
Also read: Why Serious Investors Need Bitcoin in Their Portfolios
Bitcoin Dominance Falls to an All-Time Low
For a very long time, bitcoin’s market capitalization (market cap) was considerably larger than all the other altcoins in existence. A market cap is the total market value of all bitcoins across all major exchanges at a specific point in time. Capitalization analysis is often used as a statistic that roughly shows a particular markets net worth. Since bitcoin’s initial value began and other altcoin price indexes emerged, bitcoin commanded 80-90 percent of market cap dominance. Now bitcoin dominance compared to other altcoin market shares has dropped to an all-time low of 53 percent.
During the first month of 2017 bitcoin dominance was roughly 87 percent and subsequently began to decline during the following months. Alternative cryptocurrencies such as Ethereum, Dash, Litecoin, Ripple, Monero, and others have all seen significant price spikes over the past four months. For instance, in January one ether (ETH) was worth $8 per token, and the currency had a market cap of $722 million. Now one ETH is roughly $96, and Ethereum is holding a $8.8 billion dollar market capitalization. Increases like this have been seen with numerous altcoins, and right now four cryptocurrency markets now capture over a billion in fiat value or more.
‘Deconstructing the Bitcoin Market Cap’
Even though there’s been a decline, some people believe market capitalization isn’t the best method of measuring bitcoin’s value. Civic founder and entrepreneur Vinny Lingham has written a detailed article concerning this subject and believes market caps were designed for stocks and are not constructive for bitcoin’s real valuation. In a post written last spring called “Deconstructing the Bitcoin Market Cap” Lingham states;
“Now, to be absolutely clear, this definition was meant to apply to stocks — not commodities and definitely not digital commodities. Given the comparison is a semi-reasonable proxy for Bitcoin, and it’s widely understood by the financial press.”
There are many others who believe bitcoin’s market cap and share of dominance among other cryptocurrencies should also be taken lightly. Skeptics say that most of the altcoins pumping in value are really only traded on exchanges being pumped one day and dumped a few days or weeks later. People who hold this view believe most altcoins are merely speculative tokens for trading purposes only and have yet to show any real world use.
For instance, as far as real use is concerned, the company Bitwala has stated just recently that not many people are actually using altcoins with their platform. Another example of altcoins lacking real world usage comes from the company the Living Room of Satoshi’s statistics, a startup that allows people to pay bills with cryptocurrencies. According to the company’s charts, right now bitcoin is being used by customers paying bills 88 percent of the time while other altcoins are five percent or less.
‘Losing Sleep Over Ethereum’
Nevertheless, people are still concerned about bitcoin’s market dominance among competitors who are growing in value fast. Even the Economist and Editor in Chief at Adamant Research, Tuur Demeester, recently said he was “losing sleep over Ethereum.”
“With the recent surge in the Ethereum price (ETH reaching 30% of Bitcoin’s market cap at nearly $5 billion), I find myself reassessing a number of my conclusions,” explains Demeester’s April blog post.
To the point where I’m wondering whether it could overtake Bitcoin as the dominant cryptocurrency at some point in the future.
While Others Compare Bitcoin to Concepts That Were Outshined by Competitors, Bitcoin Still Has Significantly Larger Achievements
Bitcoin’s market dominance of 53 percent is also being discussed heavily across forums and social media. Furthermore, some altcoin communities are placing the blame on bitcoin’s inability to scale and are using the scaling debate to bash the original cryptocurrency negatively. Speculators are comparing bitcoin to ideas that have fallen by the wayside due to better competitors, like Facebook and Myspace, Cassettes to MP3, and VHS to DVD. Mainstream news outlets like the Economist, Bloomberg, Reuters, and others have made similar statements that bitcoin will lose out to competitors.
Bitcoin is still doing exceptionally well during the first four months of 2017, and its value in terms of fiat is higher than ever before. It is still one of the best performing currencies worldwide and continues to make government issued tender look pitiful. It is still the most accepted cryptocurrency, processes more daily transactions, has the biggest hashrate crossing 4,064,444,090 GH/s, and many more achievements well above any other altcoin. So while bitcoin dominance may be low for now, there are a vast amount of other statistics that outshine alternatives.
What do you think about bitcoin’s market dominance now in comparison to last year? Do you think the statistic matters? Let us know in the comments below.
Images via Shutterstock, Pixabay, the Living Room of Satoshi, and Coinmarketcap.com.
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