Altcoins have always been alongside Bitcoin. The first altcoin, Namecoin, appeared sometime in mid-2011. Since then, the total number of altcoins has reached 5 digits, and they have evolved from Proof-of-Work to ERC-20 smart contracts based on Ethereum.
2017 year was ICO year and that was the year that the list of cryptocurrencies began to span more than two pages. In 2017 and the first quarter of 2018, new coins were born daily.
Bitcoin Dominance Rate is a metric used to measure Bitcoin's share of total market capitalization. Unsurprisingly, the lowest level of Bitcoin dominance was recorded on January 8, 2018, at 33,4% (according to CoinMarketCap). Most recently, following a significant rise in Bitcoin prices this year, BTC's dominance rate reached its highest level since May 2017, exceeding 70%.
However, a very common mistake made by the vast majority of websites is that stablecoins are used in calculating market dominance.
Why ignore stablecoins?
As the name implies, stablecoins- is stable coins which are usually pegged to specified currencies such as the US dollar. The reason investors hold them is usually for hedging purposes in order to stabilize the value of their crypto holdings without the need to convert them to fiat, which removes the huge volatility of cryptocurrencies.
It has absolutely nothing to do with investing in altcoins. Of course, you can invest in altcoins, but real altcoins are very volatile, and investors buy them for one reason - a high risk to reward ratio.
Bitcoin dominance correctly calculated
For this reason, stablecoins should definitely stay out of the bitcoin dominance game. Hence, the BTC dominance equation should be:
Bitcoin dominance rate (%) = (market capitalization bitcoin) / ((total market capitalization) – (market capitalization of stable currencies))
Here are the main stablecoins, according to CoinGecko:
The top 12 stablecoins have a combined market capitalization of $ 4,57 billion. CoinMarketCap shows even higher value, and one of the leading stablecoins (Tether) has a current market cap of $ 4,1 billion.
With a total market cap of $ 221,4 billion and a Bitcoin market cap of $ 150,8 billion, Bitcoin's dominance returns to 70%. The 2% difference is not a big difference, but it is significant as Tether moves up the list of top cryptocurrencies by market cap, already in fourth place on CoinMarketCap.
Here's an interesting thought experiment: if all altcoin holders sold their altcoins for stablecoins such as Tether, Bitcoin's dominance level would still be 68,2%, as it is currently calculated, even though Bitcoin would be 100% all real cryptocurrencies. After all, stablecoins are not altcoins, but stablecoins.