Market dominance is a share of cryptocurrency in the entire market. Recently, Bitcoin gained over 50% market dominance for the first time since April 2019. The BTC market dominance index indicates particular market trends and proper behaviour for many. Let's dig deeper into BTC and ETH market dominance and how to predict the market trends relying on these indexes.
BTC Dominance History
Bitcoin is the first-ever cryptocurrency, so in the very beginning, its share was 90-100%. While the first altcoins merged, Bitcoin's dominance began to decrease a bit, still remaining the most influential cryptocurrency compared to the entire market.
In 2015 Ethereum, the second-largest cryptocurrency, appeared, enabling the creation of numerous decentralized platforms with different functions besides just transferring value and money in the future. But by then, BTC dominance remained usual, with no significant changes controlling 90-95% of the crypto market.
In 2017-2018 the market experienced Initial Coin Offering (ICO) boom when investors were highly attracted by numerous altcoins and the idea of making huge profits by funding fresh crypto startups. The boom caused a radical dump in BTC dominance to an all-time low of 37.64%. After the IPO spike, the crypto winter came as some investors were dumped, and the crypto market appeared to be a massive scam for many. By the end of 2018, Bitcoin dominance had recovered to 55%.
2020 appeared to be a game changer for the crypto market as people got stuck in their houses because of the COVID-19 pandemic, put their money into cryptocurrencies to avoid inflation losses and played with crypto trading and using DeFi apps. BTC share gained 70.98%. The next unexpected boom happened in 2021 when NFTs became popular, forcing Bitcoin to lose more of its market share and drop to 42.8%. Since then, BTC's share only overpassed 50% at the current moment.
How to Use the BTC Dominance Index in Trading
In trading, there are four market states, depending on changing BTC dominance and its price. Please note those scenarios are potential but not iron, so you should consider other metrics and determinants while making trading decisions.
- BTC price and dominance grow — a signal of potential Bitcoin bull market
- BTC price rises, but dominance goes down — a signal of a potential altcoin bull market
- BTC price fallі, but dominance increases — a signal of a potential altcoin bear market
- BTC price and dominance fall — a signal of a potential bear state of the whole crypto market.
You can use these potential states to adjust your trading strategy or diversify your portfolio.
BTC Dominance vs Stablecoins
Stablecoins outstand the whole market as they don't bring extra profits or losses but only help save the value. When stablecoin's dominance grows, crypto users withdraw their funds from cryptocurrencies anticipating bearish sentiment and wanting to fix the value. When the dominance decreases, crypto users feel bullish about the crypto market and withdraw funds from stablecoins to gain profits while the crypto market grows.
ETH Dominance History
Ethereum was launched in 2015, and in the very beginning, its dominance was 23-24%. The main altcoin is inversely proportional to Bitcoin. When BTC share grows, ETH share goes down and vice versa.
By the end of 2017, the ETH market share significantly dropped to 13.43% but recovered just in the beginning of 2018 to 23.89%, sitting in the position of the second largest cryptocurrency. In 2017 the Ethereum Team took steps for Ethereum blockchain adoption and created the Enterprise Ethereum Alliance, including ConsenSys, Microsoft, Intel, MasterCard and over 150 companies. So when BTC experienced an all-time low market share in 2018 caused by sparked interest in IPOs, ETH gained a strong position by enabling the creation of dApps and having a utility within the ecosystem.
During the crypto winter, the currency's share went down to 7-10% as crypto users preferred Bitcoin. ETH dominance recovered once NFTs hit impressive popularity after May 2021 since Ethereum remains the leading blockchain for issuing NFTs.
Currently, ETH dominance shows 19-20% of control and surprisingly rises, as well as BTC dominance.
Market dominance is a helpful indicator for understanding market trends, managing a balanced portfolio and adjusting trading strategy. It is simple to use and understand, so we recommend paying attention to the dominance of Bitcoin, Ethereum, other altcoins and stablecoins in addition to other metrics and indicators.