Bitcoin’s Dominance of the Cryptocurrency Market Is Fading

For much of its history, bitcoin had been synonymous with the cryptocurrency market. But 2017 signaled a profound shift in market dynamics, with bitcoin accounting for a smaller share of the pie. This trend could intensify in 2018 as investors discover new use cases for the many altcoins hitting the market.

Bitcoin’s Declining Market Share

On Jan. 1, bitcoin accounted for nearly 88% of the cryptocurrency market’s total capitalization, according to CoinMarketCap. Twelve months later, that share has fallen to roughly 39%. At its lowest in June, bitcoin accounted for less than 38% of the market. Over that period, existing altcoins and those that emerged from bitcoin hard forks have seen their market capitalization rise.

This isn’t to say bitcoin’s influence is declining. It remains by far the largest, both in terms of market cap and daily turnover, and is capping off an incredible year of growth. However, as the recent upsurge in Ripple demonstrated, investors are noticing potential beyond bitcoin. An asset like Ripple further demonstrates that not all cryptocurrencies offer the same value proposition. Diversify in value and use case will only grow as more cryptos enter the market. At the time of writing, there are nearly 1,400 coins to choose from.

For market participants, some of the more attractive altcoins have been those that try to overcome bitcoin’s scalability issues and transaction limitations. Ripple is one example, and Cardano is another. Cryptocurrency IOTA is emerging as an enabler for the internet of things, which represents a multi-trillion-dollar opportunity. Litecoin has also earned its keep for its promise of more confidential transactions. Ethereum also suffers from transaction limitations, but has quickly emerged as the platform of choice for businesses seeking to raise startup capital via initial coin offerings (ICOs).

Bitcoin’s declining market dominance is also observed when analyzing its impact on other cryptocurrencies. For much of the year, it wasn’t uncommon for the overall market to follow bitcoin’s lead. Although this is still the case, bitcoin’s impact on other cryptocurrencies is nowhere near as high as it was just one month ago.

As CCN notes, bitcoin’s November correction was met with a nearly identical percentage decline in the market’s overall capitalization. But since plunging 30% from its most recent peak near $20,000, the broader crypto market declined by only 6%.

It’s still too early to conclude that bitcoin’s market dominance will decline indefinitely, but it’s clear that investors are beginning to diversify into other cryptocurrencies. This suggests the market is distributing wealth more proportionately across the digital asset class, which is positive from the perspective of risk.

At the time of writing, the global cryptocurrency market was valued at roughly $615 billion, which represents a gain of nearly 3,400% since the start of the year. In volume terms, bitcoin accounts for less than 40% of daily transactions. Ripple, Ethereum, Tether and bitcoin cash round out the top five, based on the last 24 hours of activity.


Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock. 

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi