Crypto Market Dominance: Understanding Power Distribution
Dominance is a measure of Bitcoin’s value in the context of the larger cryptocurrency market.
What is Dominance?
The Bitcoin Dominance Index is calculated by CoinMarketCap and tracks the total market capitalization of Bitcoin in relation to the capitalization of all digital assets. The purpose of this index is to demonstrate bitcoin’s fundamental nature to the cryptocurrency market and to draw attention to its enormous value compared to other digital currencies.
There are a number of factors that investors should consider when examining the Bitcoin Dominance Index. For example, there is some controversy over the ultimate use of market capitalization as a metric. This is due to the fact that much of bitcoin is dormant – the coins are in unused or lost wallets, or the owners have forgotten they have them. This problem is exacerbated every time there is a price spike and new amateur investors buy coins, but soon forget about their holdings. Because of the large number of dormant bitcoins (some estimate up to 30% of all mined coins), market value is a potentially unreliable metric.