New Crypto Market Research Reveals True Bitcoin (BTC) Dominance Could Be 80% with Liquidity Metric


The metrics of Bitcoin are complicated, but there are a few factors that any investor understands – price, circulating supply, and market cap. Market dominance is a little more complex, but it is just the percentage of the total market cap of all cryptocurrencies with how much of the portion BTC holds.

However, Bitcoinist recently posed a question, regarding if the community has been wrong about the interpretation of this number.

John-Paul Thorbjornsen recently decided to investigate, considering the recent reports of Bitcoin’s 50% dominance score. However, Thorbjornsen said that a better way to demonstrate the dominance of Thorbjornsen is in their trading volume or some measurement of their liquidity. He spoke on the Pareto principle, which is also known as the 80/20 rule.

The rule states that there are 20% of crypto assets that should cover an 80% dominance over the market. This rule often occurs in instances of equilibrium in nature. Considering that cryptocurrency trading is a free market, it is possible that it could follow this pattern, which would be a version of Power Law.

In Thorbjornsen’s discussion, he compared the top 100 crypto assets by their market cap, using a logarithmic scale shown below.

bitcoin dominanceThough there is some form of Power Law, as he expected, it did not quite correlate with the volumes. Ultimately, he found that some coins held under 0.1% of market cap in daily volume, which suggested either an artificial market cap or a trapped market.

Multiplying the volume by the market cap (known as Volume-Weighted Cap), there was a much more substantial correlation. As Thorbjornsen eliminated the bottom third of the coins to correct the Page 1 Effect, the results suggested that Power Law distribution was taking place.

https://bitcoinist.com/wp-content/uploads/2019/03/Screenshot-2019-03-22-at-18.27.08-980x621.png

With this metric, Bitcoin dominance was found to be at 80%. With just the top 5 cryptocurrencies by market cap, which is the 20%. Bitcoin holds 85% dominance of the market.

The question remains of what to do with the market dominance metric for CoinMarketCap. Clearly, it should not be eliminated but a renaming could possibly reflect a clearer idea of what it is.

The metric itself is still useful, but future conversations on true market dominance should probably involve the volume-weight cap for greater accuracy, especially when altcoins have almost non-existent liquidity and volume.

To read Thorbjornsen’s full blog on this topic, visit https://medium.com/@jpthor/bitcoins-market-dominance-a9693ff604bf.

Bitcoin Price News: BitMEX CEO $10K Forecast, $400K Prediction, BTC Dominance Dying + Today's Analysis

Get Daily Headlines

Enter Best Email to Get Trending Crypto News & Bitcoin Market Updates

What to Know More?

Join Our Telegram Group to Receive Live Updates on The Latest Blockchain & Crypto News From Your Favorite Projects

Join Our Telegram

Stay Up to Date!

Join us on Twitter to Get The Latest Trading Signals, Blockchain News, and Daily Communication with Crypto Users!

Join Our Twitter

Add comment

E-mail is already registered on the site. Please use the Login form or enter another.

You entered an incorrect username or password

Sorry, you must be logged in to post a comment.
Bitcoin Exchange Guide