Bitcoin dominance is a metric that weighs the market share of the highest cryptocurrency against the rest of the crypto space, including Ethereum, Polkadot, Cardano, and other altcoins. For years, analysts used it as a tool to predict discrepancies between altcoins and bitcoin.
Lately, however, the metric has lost almost all meaning and could explain why it has been trending sideways for weeks. Here’s why BTC dominance in cryptography is no longer a relevant measure.
Why Bitcoin remains the most dominant cryptocurrency today
Years ago, Satoshi Nakamoto designed the first peer-to-peer digital cash system, and the cryptocurrency industry was born. The advent of Bitcoin also brought with it a revolutionary distributed ledger technology called blockchain.
Bitcoin, the asset backed by cryptography and a consensus mechanism, cannot be duplicated, but the technology on which it was built has since been adapted in many unique ways. Ethereum, for example, links intelligent contracts with transactions so that decentralized applications can be executed in the blockchain.
Related reading | Prepare to take off: Bitcoin loses bear market trendline to altcoins
Since then, thousands of altcoins have been created competing with Bitcoin for market share. As the first cryptocurrency, BTC enjoyed the first mover benefit and everything that came with it, including brand awareness, trust, familiarity and further acceptance.
When altcoins gained dominance over Bitcoin in late 2017 and early 2018, the metric became particularly useful for technical analysis and prediction of the normally unpredictable relationship between BTC and altcoins.
BTC dominance has been stuck around 60% for weeks on end | Source: CRYPTOCAP-BTC.D on TradingView.com
BTC Dominance: No longer a reliable metric to measure crypto
Since altcoins are mainly traded against USD and BTC, they don’t always follow the same trends and patterns as Bitcoin. Analysts had once effectively used BTC dominance, but its usefulness has gradually waned. Why? Because digital assets exceed the definition of an altcoin and BTC dominance cannot keep up with innovation in the market as a metric itself.
That means there is a sea of coins on decentralized exchanges, an explosion of NFTs, and several other blockchain-based assets not included in the popular metric.
Related reading | Why March is the bloodiest month in Bitcoin history
The best example of dominance becoming less important is the fact that altcoins have performed so well, outperforming Bitcoin on ROI in most asset classes. However, the metric remains around 60% where it has now been consolidated for several weeks.
Such a lengthy consolidation could be an explosive move. Instead, however, it could lose the measure that is no longer useful as a tool for measuring crypto market trends.
Featured image from Deposit Photos, Charts from TradingView.com