Bitcoin is the oldest mineable cryptocurrency and up until late 2016, its dominance was over 90%. This dominance is based on the market capitalization of Bitcoin compared to the total crypto market capitalization, which ranged between 96%-98% on January 1st, 2015, 2016, and 2017.
Figure 1 ‐ BTC Dominance, Source: Tradingview
February 2017 is the month that Bitcoin was dethroned abruptly from its dominance. Up to that point the cryptocurrency market was a market with only one mega blue chip – Bitcoin - and a few hundred very small cap coins. Even after 2014, when Ethereum and Tether were launched, the number of projects and coins remained low and in the range of 500-600 coins.
In 2017, the ICO explosion happened and the number of coins more than doubled – over 1,300. In June 2017, the first time the total funding from ICOs surpassed the total funding in blockchain projects from early-stage VCs, Bitcoin dominance dropped as low as 50%. This was a direct consequence of the exponential increase in the number of coins in the market
2017 was the ICO year for Filecoin and EOS out of North America, for Tezos and Polkadot out of Europe, and for Bancor out of the Middle East (just to mention a few of the large ICOs).
2017 was also the year that Ethereum, Ripple and Litecoin that has launched earlier rose substantially in value, and crypto portfolio allocations shifted to these promising alternatives at the expense of Bitcoin. Bitcoin however, was still viewed by crypto natives as the reserve asset within the crypto world and the main alternative to remain invested on crypto exchanges. When crypto whales sold, they kept Bitcoin not fiat as most of the trading was on unregulated exchanges that had no link with the fiat banking system.
Fast forward to 2021 and as of March 2021, 4 years later and despite the 2018 crypto winter, we have close to 9,000 coins and a booming stablecoin market. The cryptocurrency market has several mega blue chips (the top 84 cryptocurrencies are unicorns by stock market lingo – i.e. over USD 1 billion market cap), ca. 350 cryptocurrencies with market capitalizations above USD 100 million, ca. 600 small caps ranging from USD 10 million to USD 100 million, and the remaining ca. 7,500 penny coins with market capitalization below USD 1 milion.
The USD-backed stablecoin growth started slowly around 2018, even though Tether the mega blue chip of fiat backed stablecoins was launched four years earier. Stablecoins clearly dethroned Bitcoin from being the reserve holding for crypto natives and whales.
Tether dominates the stablecoin market, currently being 70% of it. The largest stablecoins (above USD 1 billion market cap) are Tether, USDC coin, DAI, and the Binance USD. DAI is the only one that is not fiat backed but backed by crypto.
Before 2018, the majority of crypto pairs on cryptocurrency exchanges were either denominated in Bitcoin or USD and only 5% were denominated in Tether. By January 2021, 60% of trading volume on exchanges came from pairs denominated in Tether. Pairs denominated in Bitcoin account for about 10% of the volume, down from nearly 50% in early 2017.
The fiat backed stablecoins are used to fund accounts on crypto exchanges like Binance and also to post collateral for leveraged trades. Increases in the amount of fiat backed stablecoins are currently highly correlated with interest in the crypto asset class and with leverage levels.
Bitcoin`s supremacy as a reserve crypto asset has diminished and is not expected to recover, as fiat-backed stablecoins are here to stay. The explosion of startups that offer high yielding deposit rates on stablecoins, to those that are comfortable with the inherent risks, is a solid indication of the demand for stablecoins.
Bitcoin`s dominance amongst mineable cryptocurrencies with a proof of work consensus is fairly stable over past two years and remains around 60%.) Bitcoindominance.com tracks this by monitoring Proof of Work coins - Litecoin, Ethereum, Ethereum Classic, Bitcoin Cash, Bitcoin Gold, BSV, Dash, Monero, ZCash, Dogecoin, Decred.
Bitcoin`s dominance over the past two years has ranged between 55%-70% (62% being the mean). This metric includes stablecoins and all Altcoins and is therefore slightly different.
In conclusion, Bitcoin is no more the dominant reference cryptocurrency on crypto exchanges. It is no longer the only unicorn and its dominance by market cap fluctuates in a range between 55%-70%.
Bitcoin's market capitalization is just over USD 1 trillion with a dominance around 60%. Market participants have coined the term of *Flippening* which is a hypothetical scenario in which Ethereum's market capitalization exceeds that of Bitcoin. Currently, this seems far fetched as Ethereums market capitalization is around USD 200 billion and a dominance of around 11%.