Alternative Cryptocurrencies Have Drastically Weakened Relative to Bitcoin (BTC), Reminiscent of the Collapse of the Dot-Com Bubble. Ultimately This Is Making the Crypto Space Stronger Than Ever

July 15, 2019 / by Zachary Mashiach

The Bitcoin (BTC) dominance percentage, which is the Bitcoin (BTC) market cap divided by the total crypto market cap, has now risen to 66%. In other words, the Bitcoin (BTC) market cap, which is $188 billion, is now nearly double the $96 billion combined market cap of the other 2,266 cryptocurrencies listed on CoinMarketCap. This is the highest the Bitcoin (BTC) dominance percentage has been since April 2017, and there is no sign that this trend is reversing. 

Before exploring the reasons why the Bitcoin (BTC) dominance percentage is skyrocketing, it is important to understand the history of the Bitcoin (BTC) dominance percentage. Back in late November 2013, when Bitcoin (BTC) rallied to over $1,000 for the first time, the Bitcoin (BTC) dominance percentage was as high as 96%, with Litecoin (LTC) and Ripple (XRP) having dominance percentages of 2% and 1.5% respectively. 

By the end of 2014, Ripple (XRP) rallied and achieved a dominance percentage of nearly 14%, causing the Bitcoin (BTC) dominance percentage to drop as low as 78%. It is also notable that the dominance percentage of all other alternative cryptocurrencies besides Ripple (XRP) increased to over 8% at this time, indicating the first flurry of investment into the altcoin sector. 

The Bitcoin (BTC) dominance percentage then gradually increased to 91.5% by the beginning of 2016, simultaneous with a decrease in the altcoin dominance percentage to 8%. Notably, at that time, Ethereum (ETH) began to have a significant dominance percentage of 1%. 

In 2017, the initial coin offering (ICO) bubble kicked off, leading to a massive increase in altcoin dominance. By the middle of June 2017, the Bitcoin (BTC) dominance percentage dropped as low as 39%, with the Ethereum (ETH) dominance percentage skyrocketing as high as 31.5%. This is the closest any cryptocurrency has ever come to overtaking the dominance of Bitcoin (BTC). Additionally, Ripple’s (XRP) dominance ramped up to 9.5% at this time, and the dominance of all other alternative cryptocurrencies besides Ethereum (ETH) and Ripple (XRP) reached over 20%. This represents a massive influx of money into ICOs. 

The major Bitcoin (BTC) rally of late 2017 then kicked off, and when Bitcoin (BTC) reached over $20,000 in December, the Bitcoin (BTC) dominance percentage climbed back to 60%. However, the bear market of 2018 then kicked in aggressively, causing the Bitcoin (BTC) dominance percentage to decline to its all-time low of 32.3% in early January. This was simultaneous with the peak of the ICO frenzy, which brought the dominance of all alternative cryptocurrencies besides Ripple (XRP) and Ethereum (ETH) to as high as 36%. Also, the Ripple (XRP) dominance percentage alone reached as high as 20%. 

Since the bear market started in early 2018, the Bitcoin (BTC) dominance percentage has been on average rising, and this uptrend has continued during the recent bull run. Currently, the dominance percentages of Ethereum (ETH) and Ripple (XRP) are 8.6% and 4.7% respectively, with the dominance percentage of all other alternative cryptocurrencies combined at 20.8%. 

This data suggests that the alternative cryptocurrency sector has generally been weakening since the ICO bubble popped near the beginning of 2018. This is perhaps no surprise considering that numerous ICO cryptocurrencies ended up being scams and cost investors tremendous amounts of money, such as Monaco (MCO), OneCoin, Verge (XVG), Atonomi (ATMI), Bitcoiin (B2G), NEM (XEM), TenX (PAY), Decentraland (MANA), and numerous weedcoins. These cryptocurrencies are just a handful out of the numerous ICOs that failed to deliver on promises in various ways and, ultimately, left investors holding the bag.

It seems that after the widespread ICO scam wave and subsequent regulation, which has made it effectively illegal to conduct an ICO in the United States, investors have generally lost interest in putting their money into new cryptocurrencies. The data shows that most investors are choosing Bitcoin (BTC) at this point — the most reputable and valuable cryptocurrency — rather than trying to bet on the next big cryptocurrency that may compete with Bitcoin (BTC). Indeed, perhaps the idea that any cryptocurrency can compete with Bitcoin (BTC) has been laid to rest following the sobering events of the ICO bubble. 

That being said, the alternative cryptocurrency market is not going to completely die. Investors are simply choosing the cream of the crop of alternative cryptocurrencies, altcoins that have true fundamental value, such as Ethereum (ETH), Litecoin (LTC), EOS, Binance Coin (BNB), Monero (XMR), Dash (DASH), IOTA (MIOTA), Zcash (ZEC), and some others. 

Basically, after the collapse of the ICO bubble, the crypto space is contracting to Bitcoin (BTC) and several handfuls of fundamentally unique and valuable alternative cryptocurrencies while superfluous and unnecessary alternative cryptocurrencies wither away.  

This is reminiscent of the Dot-Com bubble of the 90s, when there was an explosion of investment into any and all internet business ideas. This ended in a catastrophic bust that hurt many investors, but out of the ashes, rose tech giants like Google, Amazon, and Facebook. Ultimately, the bust of the Dot-Com bubble led to a much stronger internet sector. Perhaps the same thing is happening in the crypto space as unnecessary alternative cryptocurrencies die out, leaving only Bitcoin (BTC) and a small number of the best alternative cryptocurrencies. So, in our view, the significant decline in altcoin dominance that we’ve observed since the beginning of 2018 may be paving the way for a stronger crypto space than ever before.