‘Bitcoin dominance’ is a term used to refer to the percentage of total market capitalisation that Bitcoin holds within the overall cryptocurrency market.
It is calculated by dividing the market capitalisation of BTC by the total market capitalisation of all cryptocurrencies. For example, if the market capitalisation of Bitcoin is $500 billion and the total market capitalisation of all cryptocurrencies is $1 trillion, Bitcoin dominance would be 50%.
This is a widely observed metric in the cryptocurrency industry, as it provides an indication of the relative strength of Bitcoin compared to other cryptocurrencies. High Bitcoin dominance indicates that BTC is the dominant player in the market and that other cryptocurrencies are struggling to gain ground. Conversely, low dominance indicates that other cryptocurrencies are gaining popularity and market share.
One of the main reasons for BTC’s high dominance is the advantage of being the first cryptocurrency created: this longevity has allowed it to build a strong network effect.
However, the cryptocurrency market is constantly evolving and dominance can change rapidly. As new cryptocurrencies emerge and gain popularity, they can begin to undermine Bitcoin’s dominance. For example, in 2017 Bitcoin dominance had reached 95%, but by the beginning of 2018 it had dropped to around 33% due to the popularity of other cryptocurrencies, such as Ethereum.