Bitcoin forms the largest cryptocurrency in the world by market capitalization. It also commands a large trading volume in the cryptocurrency markets. If we look at a summary of all market capitalizations for the existing cryptocurrencies, then we can get the total market cap valuation for the whole cryptocurrency space.
Bitcoin is also the most famous cryptocurrency worldwide. It has gained some level of trust that other cryptocurrencies have not. It’s the “mother ship” of other cryptocurrencies.
Bitcoin bulls are the greatest beneficiaries of this, but it comes at a price. When the price of Bitcoin rises, it is seen as bullish for cryptocurrency. The balance is not simple. This “Bitcoin dominance” becomes a threat to other digital currencies.
Understanding Bitcoin Dominance
Bitcoin dominance is the ratio between the market cap of Bitcoin to the other cryptocurrency markets. This ratio was almost 100% between 2009 and 2013 when Bitcoin was the only known cryptocurrency. With time, Ethereum was discovered, then Litecoin and Ripple, becoming rivals to Bitcoin.
Note that the price of Bitcoin may drop, but its dominance among other cryptocurrencies can remain the same or even rise. This dominance is affected by the price since people get more involved with Bitcoin when its price goes up. Bitcoin dominance is also affected by hash rates, which is the speed at which new bitcoins are created by miners.
Bitcoin vs. Ethereum
Currently, Ethereum is the greatest rival to Bitcoin. However, the difference between the two coins has been rising. In 2019, Ethereum recorded a drop in price. About 31.31 Ethereum wallet addresses stand in a losing position. This happens at a time when Bitcoin price is rising.
This trend can be attributed to Ethereum’s technical upgrades which are running behind schedule. For long, Ethereum has missed deadlines for protocol upgrades. These issues have led to Bitcoin dominance. It has increased from 51% to about 70%. This marks an 87% increase in Bitcoin dominance at a time when Ethereum is experiencing upgrade issues.
Impact on Altcoins
According to experts, Bitcoin dominance may destroy altcoins. It is expected that Bitcoin dominance will reach 85% in 2020. The Bitcoin dominance will increase by 10-15% up from 70%. This trend may increase until it reaches 90%, 95% and then 98%.
This means that Bitcoin dominance may squeeze altcoins out of existence, or marginalize them. The main factor behind Bitcoin’s success is its powerful hash rate. This hash rate has increased by 800% since December 2017.
No altcoin has recorded such a high growth in hash rate. Also, a price target of $50,000 for Bitcoin by 2023 is reasonable. Note that the cryptocurrency market is very volatile and anything is possible.
This means that you have to be cautious with altcoins. To remain on the safe side, keep on watching the hash rates. This will give you in-depth insights about the future of Bitcoin and its competitors. Also, watch the Bitcoin price as the baseline for determine the price performance for altcoins. Currently, the results seem to be dire for altcoins.