Bitcoin Vs. Altcoins: Market Capitalization (MCAP)
By Lamium on Altcoin Academy
Market capitalization, also known as market cap or MCAP, is calculated by multiplying the total number of bitcoins in circulation by the bitcoin price. The bitcoin market capitalization increased from approximately 1,02 billion USD in the first quarter of 2013 to almost 200 billion USD in the second quarter of 2019. Why bitcoin’s MCAP is relevant? Why is it bigger than altcoins? Let’s find out.
Bitcoin’s Dominance in Market Capitalization
During the 2019 cryptocurrency rally, bitcoin’s market share, also known as “Dominance Index”, has increased into 61% (23.6.2019). Especially small-cap altcoins and tokens are rapidly losing market share. This trend is supported by a maturing market, as investors are more focused on value-adding digital assets after the infamous ICO hype.
Bitcoin’s dominance has steadily grown from Q1 2018 low 29% to >60% in the second quarter this year. As a source of liquidity to the market, we see bitcoin’s dominance continuing to grow in the long-term future. Bitcoin also has the first-mover advantage as officially the first cryptocurrency to market. Bitcoin’s network effects are unmatched. Additionally, bitcoin’s 21M hard cap was built to mimic gold, making bitcoin a naturally scarce digital asset.
When exploring the market cap data we should always remember that MCAP is only a relevant metric when it’s supported by volume relative to MCAP, and when volume comes from a broad group of participants that are representative of market demand. Many altcoins don’t fit the criteria above, so the real (organic) bitcoin dominance is well over the said percent.
Small Cap Altcoins Losing MCAP
Bull market for bitcoin, a bear market for altcoins? Some analysts expect bitcoin’s dominance to increase into a 70% level. Bitcoin remains the source of liquidity for the market.
Most altcoins within the market also trading against BTC and not just USD, causing their values to be tightly correlated to bitcoin’s price movements relative to USD. This is why when Bitcoin rises or falls, altcoins can often be pulled right along with it.
Why are altcoins losing market share to bitcoin? The true purpose of any digital asset is to provide added value to its owner. After 2017 altcoin / ICO hype, it’s becoming incrementally clear that the buying pressure behind rising small cap alts was mainly speculative. Bitcoin instead, launched over 10 years ago, has developed into a digitally scarce asset class, desired by retail and institutional investors globally.
Get Started with Lamium Today!
Starting using Lamium is easy. Go to lamium.io and create your account today!
If you have any questions, don’t hesitate to approach us: support@lamium.io.
Follow Lamium on Twitter: twitter.com/LamiumBTC.
This content has been produced in association with dcresearch.
