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Are Altcoins More of an Illusion? New Research Suggests Bitcoin Dominance at 90%

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“Everyday bitcoin stays ahead, it becomes less likely that any other cryptocurrency can compete as a money,” these are the ominous words of Bendik Norheim Schei, an analyst at Arcane Research who has carried out a study that suggests Bitcoin’s dominance is over 90 percent.

Market dominance has been a popular topic in the news of late as Bitcoin has once again been expanding in this area. According to Coinmarketcap, the dominance over the market for Bitcoin currently hovers at 68.7 percent. The last time these types of numbers were seen was in April 2017.

Bitcoin has had a good year thus far, especially in relation to the 2018 bear market which saw its price slump towards $3,000 and the entire cryptocurrency market struggle to make any notable gains. 

The same cannot be said about Altcoins though, which have, mostly, ridden on the coattails of Bitcoin in their own 2019 recovery. However, this recovery may not amount to much if the latest study is to be believed. 

Researchers at Arcane Crypto claim to have found that if Bitcoin’s dominance is adjusted for liquidity by calculating the volume-weighted market capitalization, it soars to over 90%. This means the rest of the cryptocurrency market amounts to less than 10 percent — a figure that makes their success even more unlikely.

This assertion from Arcane Crypto is yet to be fully proven, and probably cannot be so, but theoretically, it does hold a lot of water. 

Schei argues that market capitalization without considering liquidity is meaningless.

“The main reason is that one could easily create a cryptocurrency with 1 billion pre-mined coins, and do one trade at say three dollars each,” Schei wrote. “This would lead to a total market capitalization of $3 billion, which would represent 1 percent market dominance with today’s valuations and inflate the total market capitalization.”

“The problem is that the calculation does not take liquidity into account. One might be able to sell one token for three dollars, but what happens if you want to sell 1 million? Without accounting for liquidity, market capitalization becomes a meaningless measure.”

Depending on what side of the fence you sit – Bitcoin maximalist or altcoin advocate – this study makes for interesting reading. Bitcoin’s liquidity is undoubtedly famed, and its domination cannot be questioned, but if it sits at 90 percent, then altcoins should be worried. 

It is not so much about the value or usefulness of other tokens; it is more about the message that their low dominance portrays to other companies looking to use and integrate cryptocurrencies. 

If there is one offering that 90 percent of people are using, and then there is a basket of hundreds that only 10 percent are using; companies wanting to integrate cryptocurrency services would be foolish to look anywhere else than Bitcoin.

Darryn Pollock

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