Why Does This Indicator Not Reflect The Real Share Of BTC In The Crypto Market?
Bitcoin is still far ahead of altcoins in terms of dominance in the crypto market. But how much does this metric correspond to reality, and how can crypto exchanges speculate on this?
Is Bitcoin’s dominance deliberately reduced?
2020 turned out to be a complicated year for the flagship cryptocurrency: the collapse in March, the absence of the expected bull run after the halving of rewards, and a three-month price consolidation – all this negatively affected the level of Bitcoin’s dominance in the crypto market. Today, the dominated Bitcoin index is about 60%, which is almost comparable to the level of 2019.
While Bitcoin has partially lost its position in the crypto market, altcoins, on the contrary, have strengthened their presence on trading floors. It may seem that Bitcoin’s dominance is in a precarious position, and the success of altcoins could change the paradigm of the cryptocurrency market.
Studying this issue, a group of analysts concluded that the Bitcoin dominance index is not calculated correctly for other assets. They believe that the share of Bitcoin in the financial market should be weighed against assets that claim to be decentralized funds and are included in the turnover to replace fiat in the future. According to these calculations, the real dominance of Bitcoin is 80%.
Investor Jordan Tuwiner criticizes the calculation of the cryptocurrency dominance index. He is convinced that for a more accurate ratio of the share of digital currency in the crypto market, it is worth considering exclusively the crypto currency, which goes through the process of mining and entering into circulation by analogy with Bitcoin. Tuwiner believes that coins that have been created as a result of a one-time emission (ICO) should not be taken into account when auditing the actual dominance index. He commented on his position:
“ICO tokens do not meet the standards of decentralized assets, as they are a product of crowdfunding. Potentially, this is not money, so it should be excluded from the calculation of the digital currency dominance index in the market. That also applies to stablecoins, which are a halfway solution for digitizing fiat. ”
What about Ethereum?
In Tuwiner’s concept, the question remains open whether Ethereum should be taken into account when calculating the dominance index since ETH appeared thanks to the sale of tokens. He noted:
“Given the market cap and the growing demand for the crypto asset, Ethereum could be included in the assessment of cryptocurrency market dominance.”
Excluding Ethereum’s trading performance, Bitcoin’s real dominance index would be 92%.