Even though Bitcoin is still dominating the overall cryptocurrency market, its undisputed position has recently taken a few bumps along the road.
Bitcoin Dominance Index, which measures the market cap of Bitcoin compared to all other cryptocurrencies in existence, today has fallen to its lowest level since CoinMarketCap.com started publishing its statistics in April 2013. Its current value illustrates that Bitcoin’s dominance has dipped to 37.60% over the past three weeks, which is an all-time low.
This is good news for people who hold diversified portfolios, though this authoritative index doesn’t necessarily tell the whole story either.
Who Can Unseat Bitcoin
Let’s recall that Bitcoin regained its 65% dominance over the cryptocurrency market in early December, which came five months after dropping below the 40% threshold, primarily due to the strong rally that took the price higher to around $20,000 per coin.
Crypto enthusiasts should take away two important lessons from June’s decline: cryptocurrency investors turn back to Bitcoin in times of instability and uncertainty, and the chief coin can recover from massive drops caused by major corrections.
It’s also important to consider the dependence of other crypto coins on bitcoin and the network effect it presents over the virtual currency market. Except for a few coins, a significant drop in bitcoin prices led to the decline of other altcoins. In most cases, altcoins suffered deeper losses in market cap and price in contrast to bitcoin.
Let’s put these figures into perspective.
Bitcoin losing its market cap dominance doesn’t mean its own market cap shrinks. The adoption, market value, frenzy and price of Bitcoin are all healthier than ever and thus continue to defy sceptics. However, it means that its longstanding supremacy is cooling off as the market matures and other crypto assets share more equally within the overall combined capital.
A clear evidence is that Bitcoin boasted an impressive 88% market capital dominance in December 2016. Delving into Q3 2017, the price was printing all-time highs coming in almost daily while the dominance has slowly decreased over time.
Meanwhile, Bitcoin still generates most of the trading volume, even altcoins that have gained mainstream traction as of late mainly get their trading volume from the Bitcoin trading pair.
A portion of Bitcoin’s recent downtrend, in terms of market dominance, can be attributed to Ripple’s massive appreciation as the coin was a rare exception to the cryptocurrency bloodbath in December. The surging altcoin, which was designed for banks and global money transfers, challenged Ethereum for the second post in the market cap rankings. Further, it has surged roughly 24000% in 2017.
Ripple’s recent rise can likely be attributed to its adoption by major banks in Asia in a bid to reduce costs of international funds transfers, and as the XRP’s developers have recently established a partnership with some of the Japan’s largest credit card providers.
While competitive to a degree, Bitcoin and Ripple aren’t direct threats to one another. The two cryptocurrency giants seemingly have different missions at the moment. Ripple appears intent on pushing its blockchain to enterprises, while Bitcoin has focused extensively on building up its reputation as a payment facilitator.
However, this narrative could change as Ripple while trying to settle transactions in real time to keep costs down, is essentially challenging Bitcoin which struggles with these drawbacks. Indeed, recent infighting in bitcoin’s development community has provided the perfect chance for alternatives to stress their value propositions and even assert new ones.