Exploring the Market Share of Bitcoin vs Altcoins
Bitcoin was the first cryptocurrency that was invented and despite changing narratives it proved to be the most valuable one over the course of time.
Since the inception of Bitcoin and the following validation a new technology started to evolve. The subsequent forks and iterations led to the emergence of thousands of cryptocurrencies. However, Bitcoin was dominating the market for the years to come.
In 2017 for the first time Bitcoin’s market share of the total cryptocurrency market, which is commonly referred to as Bitcoin Dominance, dropped below 50%. Among other reasons this was due to the astronomic rise of Ethereum. In June 2017 the market capitalization of Ethereum came very close to the market capitalization of Bitcoin.
Bitcoin Dominance found its lowest low so far in January 2018 after setting a new all time high in December 2017. In the following Bitcoin Dominance continued to increase until July 2019. The period from July 2019 to September 2020 brought a decline of the dominance followed by another increase.
Now in November 2020 it seems that Bitcoin Dominance peaked one more time at 65%
The following indicators point towards a decline of Bitcoin Dominance in the following months:
- Bitcoin went on a mind blowing rally in autumn 2020 increasing by more than 60% in just 1 month (from October 20 to November 20)
- Altcoins were bleeding on the ratio during this incredible rally
- Bitcoin currently seems to have found a spot for consolidation which enables money to flow into altcoins
- Altcoins are already bouncing back on the ratio as Bitcoin is starting to consolidate
How should you position yourself for the coming months?
- If you follow a passive investment strategy and hold on to your crypto long term you might just keep calm and continue in your positions. There inevitably will occur further periods in which Bitcoin will outperform Altcoins during the current market cycle.
- If you are actively managing your portfolio or a part of it you might consider allocating some Bitcoin into altcoins right now. Since Ethereum is a proxy for altcoins you should definitely consider increasing your stack in Ethereum. Furthermore, ETH 2.0 is expected to launch soon as the deposit contract is getting a lot of traction lately. Ethereum might outperform Bitcoin over the next three months and therefore it is attractive to increase your allocation in Ethereum over this period of time.
To sum up…
In general the overall trend for Bitcoin dominance is declining. However, this decline does not occur in a linear way since Bitcoin is gradually fighting back and showing its strength to the market.
Also, the altcoins that are gaining in value are different during each cycle. Therefore Bitcoin definitely remains the safer and more conservative investment. On top Bitcoin price volatility is significantly lower compared to Altcoin price volatility.
If you are invested in the crypto market it is very important that you realize the dynamics that are at play. The ratios between Bitcoin and the leading Altcoins are some of the most important factors in the market.
If you are playing long term games through passive investing, you can just ignore these trends and sit them out. However, if you are actively managing your portfolio you may try to increase your Altcoin allocation during periods when indicators point towards a decline in the Bitcoin ratio. Make sure to choose your Altcoins responsibly due to the risks they carry.