For the entire history of cryptocurrency, bitcoin has been the dominant coin almost entirely because it was the first fully functional cryptocurrency to go live and showcased the power of the blockchain. According to CoinMarketCap, Bitcoin has mostly had a 90% dominance over the market from 2013 to 2017. This means that for four years, 90% of the money within the cryptocurrency market was in the form of bitcoin. It also means that bitcoin had the highest market capitalization.
However, from March 10th 2017 to June 19th, 2017 its dominance fell to a mere 37%. In the space of just 101 days, bitcoin lost 53% of its dominance. Since then, it has never seen dominance beyond 65%. Bitcoin’s massive fall from grace was the first time that the market got a sense for its vulnerability, and if it wasn’t for such a drop in dominance, we might not have the same thriving and diverse market that we have today. This is because, on June 12th, 2017, Ethereum reached its highest market dominance of 33%. Bitcoin’s loss of dominance allowed for Ethereum’s network to grow and flourish, providing us with hundreds of ERC20 tokens.
Here is a view of market dominance. Bitcoin is in orange, Ethereum is in dark blue, and Ripple is in light blue. An interactive view can be found here.
Here is a zoomed in version covering only one year.
At the moment, Bitcoin’s dominance is at 42%. This is still a massive number. In fact, it is absurdly massive. For comparison, there is nothing in the stock market that comes close to such dominance. While Bitcoin is a powerful force in the industry, it is perhaps not powerful enough to stay dominant forever. What would happen if it lost its dominance altogether? What if another coin held dominance?
Bitcoin could lose its relevance
Bitcoin will always be remembered as the first cryptocurrency and the coin that brought us blockchain technology, but this alone is not enough to keep it relevant. Right now, bitcoin is used as a gateway into the world of cryptocurrency for investors. People mainly buy into it so that they can exchange it for other cryptocurrencies through services like Binance. This is partially because bitcoin is the most used trading pair, meaning that you need it to make trades with other more obscure coins. If bitcoin lost its dominance, it is likely that it would stop being used as the leading trading pair on exchanges.
No longer a viable store of value
People who use bitcoin as a means of storing their wealth might think twice if it was to lose its dominance. At the moment, the most appealing aspect of using bitcoin for this function is that it is worth more than other cryptocurrencies. Without its dominance, people may start looking into other coins as a store of value. It is possible that they would come to the conclusion that a stablecoin is better suited for the job. Stablecoins are cryptocurrencies which are pegged to the price of something external (usually to legal tender or possibly gold). The most (in)famous example of this is Tether, which is pegged at $1.00, but investors are wary of using it as a store of value because of its shady handlings. New stablecoins like Dai are being developed that aim to take over from Tether.
The perk of storing your money in a stablecoin is that you can be confident that it will not fluctuate drastically like every other cryptocurrency.
Bitcoin’s price could drop significantly
Not only does bitcoin have market dominance, but it is also the most expensive coin on the market. Technically, bitcoin could remain the most expensive cryptocurrency even with a minority dominance, but this is unlikely. Bitcoin’s price is arguably tied to people’s trust that it will stay dominant. Without its dominance, it loses its proof of relevancy, and therefore its price.
We would have a new dominant coin
Naturally, if bitcoin lost its dominance, we would have a new dominant cryptocurrency. A reasonable guess would be that Ethereum would become the new dominant coin since it has the second largest market cap right now. If Ethereum gained market dominance, it is possible that all ERC20 tokens could rise significantly in price too as they rely on Ethereum’s blockchain. This would change the landscape of the market substantially. Ethereum dominance could mean that more Ethereum tokens enter the top ten on CoinMarketCap (currently only one token is there).
How likely is it that Bitcoin will lose its dominance?
Bitcoin has only once come close to losing its dominance, which was on June 12th, 2017, when Ethereum’s dominance rose. Since then it has kept a comfortable distance from all other coins. The reason people think bitcoin will lose its dominance is that other coins, like Ethereum, are more functional. You can use this tool to see how close Ethereum is to overtaking Bitcoin in terms of dominance.
With that said, Bitcoin may never lose its dominance. While it does seem likely that one day another coin will be more valued, there is no reason to say that will ever happen. This was merely a discussion regarding what might happen should such a situation arise.
What are your thoughts? Join the debate over in our awesome Telegram community, and see what everyone else thinks.
Kai is a cryptocurrency copywriter and professional trader. He can often be found investigating various cryptocurrencies, whitepapers, and blockchain technologies. Kai has been a professional writer for 5+ years, and has invested in 50+ different coins and tokens. He also currently studies Law and Philosophy at university.