[TL；DR]:
Bitcoin market share refers to the proportion of Bitcoin's market value in the entire digital currency market.
Bitcoin market share can be one of the important indicators for investors to analyze the development trend of the digital currency market and predict future trends.
Presently, the demand for risk aversion is driving up the market share of Bitcoin, which may end the bear market and push the market into a comprehensive bull market after Bitcoin dominates the absolute market advantage position.
Introduction
As the cryptocurrency with the highest consensus, Bitcoin plays an unparalleled cornerstone role in the crypto finance market, and its market value share in the entire market is an important indicator for people to judge market trends. Recently, this ratio has risen to 51%, which has sparked market discussion. This article will explore the use of Bitcoin's market value share indicator from simple to deep, and look forward to the future market for readers.
What is the Market Share of Bitcoin?
As the name suggests, Bitcoin dominance (BTCD) refers to the market value share of Bitcoin in the entire digital currency market. Bitcoin Market Value Ratio Chart 1: Coinsoto
Among them, market value refers to the total value of assets, which is calculated based on market prices and circulation. The calculation method for Bitcoin market share is to divide the market value of Bitcoin by the total market value of the entire digital currency market, and then multiply by 100%.
Usually, during market downturns, Bitcoin has a stronger hedging attribute as the leading currency, and investors tend to allocate their funds and tokens to Bitcoin to offset market downside risks. Therefore, in the late bear market and early bull market, the market value of Bitcoin often increases.
When the market tends to prosper, Altcoin and Shitcoin emerge one after another. Even with a small injection of funds, it may still outperform Bitcoin's returns. Therefore, investors will shift their funds from Bitcoin to pursue higher returns, leading to a gradual decline in Bitcoin's market value in the late bull market and the early bear market.
However, in the long run, the crypto market is still in its early stages of development, with new projects emerging one after another, and old projects beginning to stabilize their market share. The number and market value of tokens are increasing in the long run, which will undoubtedly weaken Bitcoin's market share advantage to some extent.
In summary, the market value of Bitcoin has the following characteristics:
In the short term, the market value of Bitcoin will decrease in the mid to late bull market and increase in the mid to late bear market;
In the long run, the market value of Bitcoin will slowly decrease as cryptocurrencies develop.
What Does it Mean for BTCD to Rise to 51%?
The market value of Bitcoin has been steadily increasing since September last year, from 38% at the time to 51% recently.
This means that against the backdrop of tight liquidity, the market share of Bitcoin driven by hedging demand is increasing, and its price trend will have a significant impact on the entire crypto market. It is a barometer of market volatility, and I believe investors who have been paying attention to the crypto market since this year should have firsthand experience.
We can also see the relative strength of Bitcoin by simply looking at the trend of ETH/BTC. As shown in the figure below, since September last year, ETH has been in a weak position relative to BTC. The shift in strength between the two clearly reflects the market game under existing funds. On the one hand, investors are laying out the benefits of Bitcoin's halving market, spot ETF review, and the Federal Reserve's cessation of interest rate hikes. On the other hand, the freezing point of Ethereum chain activity has reduced investor interest. This is very similar to the situation in 2019 during the early stages of the previous bull market. ETH/BTC Weekly Chart 2 Source: Gate.io
Another point worth noting is that Bitcoin's dominant position in the absolute market may end the bear market and push the market into a comprehensive bull market. This is because as the market value ratio increases, Bitcoin's leading position will eliminate speculative sentiment and junk projects, which is beneficial for enhancing investors' confidence in pricing. The market recovery will also benefit various project sectors, leading to the emergence of other mainstream coins and Altcoins.
The above analysis is not out of thin air, but has certain historical experience support. Before 2017, the share of Bitcoin remained stable at over 80%. With the rise of ICO brought about by smart contracts in 2017, Ethereum and many ERC20 tokens flooded out, severely diluting Bitcoin's market share.
Immediately after, in early 2018, ICO rapidly declined, and investors withdrew their funds from the loss making counterfeit coins and invested them in Bitcoin, gradually increasing the proportion of Bitcoin from 32% to over 50%.
When the market saw a Mavericks rebound in the second quarter of 2019, Bitcoin held an absolute dominant position in the market recovery stage, with a market share of up to 58%. This is indeed consistent with the recovery trend and Bitcoin market share trend since the beginning of this year.
What is the Aftermarket of the Crypto Market Like?
From recent market reactions, it can be seen that there is no sign of a pullback after Bitcoin's market share has exceeded 50%. Although Bitcoin still maintains a relatively strong position, Altcoin is no longer sluggish due to the vampire effect as before, and on the contrary, it has begun to emerge from a more active upward trend recently.
In other words, the market value of Bitcoin has recently reached a new high of nearly two and a half years, which may indicate the arrival of a value bull market dominated by Bitcoin, and the market tone will gradually shift from pessimism to a positive atmosphere. BTCD Weekly Chart 3 Source: AICoin
Looking back at history, the market value of Bitcoin has generally increased in the past few rounds of bear-to-bull cycles. Firstly, the vampire effect of Bitcoin led to the first stage of Bitcoin's relative resilience and Altcoins’ weakness, and then the second stage of Bitcoin's rise, followed by the rise or strong rise of Altcoins. We seem to have just entered the second stage.
It should be added that the market share of Bitcoin will change over time. Due to changes in the peripheral environment of the crypto market, the market value and market share of Bitcoin will be influenced by many factors, such as market demand, regulatory policies, and liquidity tendencies. Therefore, when using this indicator, we also need to pay attention to the latest data and trends, and conduct comprehensive analysis in conjunction with other relevant methods.
In summary, based on historical data and logical rules, we have analyzed the market signals of the innovative high market share of Bitcoin. Of course, the crypto market is still in a relatively early stage of development, which determines that there will be many perspectives and indicators that need to be adjusted before the market matures. Therefore, Bitcoin market share should not be used as a single trend prediction indicator. Readers should conduct cross-analysis by combining multiple options more comprehensively, To obtain more accurate market observation.
Introduction
What is the Market Share of Bitcoin?
What Does it Mean for BTCD to Rise to 51%?
What is the Aftermarket of the Crypto Market Like?
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