Bitcoin has become so popular and so valuable that even today, when many other cryptocurrencies are also worth a lot, Bitcoin still accounts for a large portion of the trading volume across the entire industry. So much so that there is a metric that compares the market capitalization of Bitcoin with the current value of every other cryptocurrency combined.
The ratio between these two figures is what the market refers to as “Bitcoin dominance,” or “BTC dominance.” In this AAG Academy guide, we’ll cover what Bitcoin dominance means, why it exists, and why it is an important part of the cryptocurrency world.
For many years, Bitcoin’s value was significantly greater than that of all other cryptocurrencies put together — sometimes by as much as 100%. In other words, if you added together the market value of every single cryptocurrency in existence (except Bitcoin), Bitcoin would be worth twice as much. That’s pretty incredible when you think about it.
In recent years, thanks to the rising popularity of cryptocurrency in general, Bitcoin’s dominance has fallen, and it will likely never reach the highs it once did (in dominance, not value). However, BTC remains the most valuable digital currency, and by a significant margin. As of October 13, 2022, Bitcoin’s market capitalization is just under $370 billion.
To put that figure into perspective, Ethereum, the second-most valuable cryptocurrency in the world, is worth less than half that at just under $156 billion. Even if you combine four of the top five cryptocurrencies — Ethereum, Tether, USD Coin, and BNB — their total market capitalization is still significantly less (by more than $50 billion) than Bitcoin’s.
So, even in 2022, Bitcoin dominance still exists, and with Bitcoin itself showing no signs of losing its title as the world’s most valuable and most popular cryptocurrency, it is likely to exist for many years to come.
Why is Bitcoin so popular?
You might be wondering why Bitcoin is so popular. There are many reasons for that, including the fact that it is the world’s first cryptocurrency. When it made its official public debut in 2009, Bitcoin was the first decentralized digital currency based on blockchain technology. It essentially laid the foundations for the entire cryptocurrency industry.
Of course, that’s just a small part of it. Bitcoin also got so many things right from the very beginning, which has helped it maintain its standing as the king of the industry, even while lots of other coins and tokens — many of which are just Bitcoin clones — have become hugely successful. Chief of which is Bitcoin’s ability to act as a regular currency.
Bitcoin has also enjoyed lots of hype over the years, which helps increase demand, and unlike lots of other cryptocurrencies, it is finite in its supply. There is not an unlimited number of BTC. Around 19 million have been minted so far, and when that number hits close to 21 million, which is expected to happen in 2140, it will be impossible to mint more.
Furthermore, Bitcoin is one of the most accessible cryptocurrencies. It is available from almost every exchange in the world, including the biggest centralized exchanges, many of which allow you to purchase coins with a debit card in some countries. That means that acquiring Bitcoin is almost as easy as ordering a T-shirt online.
All of these things, plus a lot more, have helped Bitcoin attract the largest user base of any cryptocurrency. An estimated 144 million wallets hold Bitcoin worldwide, and there are currently almost 300,000 Bitcoin transactions conducted every single day — even while the cryptocurrency industry, like the wider economy in many countries, is in a slump.
Let’s compare those figures to Ethereum’s, the world’s second-most valuable cryptocurrency, to put them in perspective. While there are more ETH transactions every day (more than 1 million) due to the fact that the Ethereum blockchain is home to a large number of the world’s smaller cryptocurrencies, the latest data suggests that less than 100 million wallets hold ETH.
Most accepted cryptocurrency by merchants
You may not be surprised to learn, given that it was originally designed to be an alternative to traditional fiat cash, that Bitcoin is also the most accepted cryptocurrency by merchants. In fact, more than 15,000 of them — including major brands like Microsoft, AT&T, and Twitch — now accept BTC for goods and services. No other cryptocurrency can offer that.
Bitcoin’s acceptance will almost certainly continue to increase in the coming years due to the fact that it is so popular among cryptocurrency enthusiasts. And while it may be volatile like others, it is also one of the most stable cryptocurrencies. Its value may fall from time to time, perhaps significantly, but it has always returned and even surpassed its previous highs.
Bitcoin is based on proof-of-work (PoW)
As we mentioned above, Bitcoin laid the foundations for the rest of the industry by popularizing a number of technologies that have become critical to almost every other cryptocurrency. One of those is the proof-of-work (PoW) consensus mechanism for verifying cryptocurrency transactions, recording them on the blockchain, and minting new coins.
PoW allows anyone with the right hardware to contribute to Bitcoin’s validation process by solving complex mathematical problems. This involves verifying transactions, recording them in a block, and then adding that block to the chain. As a reward for their work, contributors or “miners” are given one new BTC for every block that is processed.
In the early days of Bitcoin, mining was a much simpler, less intensive task, which made it very popular. However, as the mining process has become more complex over the years, significantly more powerful hardware is required and competition is much more fierce. Although BTC mining can still be lucrative, the barrier to entry is much higher.
Bitcoin’s success and popularity have naturally led to a considerable number of clones. Many of the “altcoins” (cryptocurrencies that aren’t Bitcoin) in existence today — including some of the biggest and most valuable ones — are little more than Bitcoin clones. They launch with their own goals and objectives, but they operate in almost exactly the same way.
For instance, Litecoin, a popular altcoin with a current market value of almost $4 billion, was created from a copy of Bitcoin’s source code. It functions in almost exactly the same way and uses the same proof-of-work consensus mechanism.
Bitcoin and Ethereum were designed to do completely different things, and they operate in very different ways, so it’s difficult to compare the two. Which one is “better” depends on what your own cryptocurrency objectives are. Bitcoin is certainly worth more — a lot more — but Ethereum can do things Bitcoin can’t, and vice-versa.
That seems highly unlikely at this point in time. Bitcoin’s market value is significantly greater than that of Ethereum, Tether, USD Coin, and BNB (the other four in the top five) combined, and it shows no signs of losing its crown any time soon.
Bitcoin was built to be an alternative to traditional fiat currencies, such as the U.S. dollar and the euro, and that remains its primary objective. Ethereum was instead designed to be an open-ended decentralization platform that other cryptocurrency projects could take advantage of. A large portion of the cryptocurrencies available today use Ethereum’s blockchain.
You can easily track Bitcoin dominance using a chart like the one provided by TradingView. This will show you current Bitcoin dominance as a percentage. For instance, if the chart shows 43%, it means Bitcoin is currently worth 43% more than all other cryptocurrencies combined.
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About the author
Senior content writer
Senior copywriter for AAG Marketing team with the focus of educating our community on all things web3, blockchain and Metaverse.
This article is intended to provide generalized information designed to educate a broad segment of the public; it does not give personalized investment, legal, or other business and professional advice. Before taking any action, you should always consult with your own financial, legal, tax, investment, or other professional for advice on matters that affect you and/or your business.