Since the creation of Bitcoin, there has only ever been one cryptocurrency at the top of the market cap rankings, despite thousands of competitors being created over the years.
The Bitcoin price defines all other cryptocurrencies. Indeed, altcoins are not only priced in dollar terms, but also in terms of satoshis – their worth in Bitcoin. But why is it that the Bitcoin price defines the cryptocurrency market?
Bitcoin price dominance
When looking at the total market cap of all cryptocurrencies, Bitcoin has always maintained its dominance. While this dominance has shrunk in recent years, even to this day, and despite challenges from all corners of the market, Bitcoin’s dominance of the market remains above 50%.
When the price of Bitcoin rises, generally you can expect altcoin prices to rise with it. Likewise, when the Bitcoin price drops, altcoins also follow. There may be some lag in-between, but the coupling of Bitcoin to altcoins is one that is yet to be truly broken.
The reasons for Bitcoin’s dominance are numerous. To begin with, Bitcoin has had the first-mover advantage over its competitors. Thanks to this, even people who are not interested in cryptocurrency have still usually heard of Bitcoin.
This makes it all the more likely that the first cryptocurrency that newcomers purchase will be Bitcoin as well. On top of this, despite efforts from a variety of communities, there hasn’t been any conclusive evidence that there is a better cryptocurrency out there other than Bitcoin.
People might point to Bitcoin’s slower transaction speed or wasteful Proof-of-Work mechanism, but the core tenants of Bitcoin and cryptocurrencies – namely decentralisation and global money – are still prevalent today.
Practically all cryptocurrencies remain untested and have complex goals. Ethereum and other smart contract platforms have yet to see fully successful projects built on top and are still very much experimental.
Arguments still continue to this day over the possible use cases of blockchain. They are generally split into two camps: those who believe that a blockchain has a fairly limited use case, in essence only useful for monetary transfer such as Bitcoin, and others who claim that blockchain will be a revolutionary piece of technology akin to the internet.
Bitcoin has through the years though shown that not only is there a market for itself, but that it provides real-world value.
Competitors through history
The biggest challenger to Bitcoin’s dominance has been Ethereum. The concept that Bitcoin might lose its throne became known as “The Flippening” during 2017 when the dominance of Bitcoin looked set for a challenge.
There were a couple of reasons for this challenge appearing. Firstly, the hype surrounding Ethereum gave the cryptocurrency huge momentum. The ICO craze of 2017 was driving the price of Ethereum ever higher. At the same time, Bitcoin was in the midst of its scaling wars. With a bloated blockchain and no sign of peace, Ethereum was able to make substantial ground on Bitcoin’s throne.
Despite “The Flippening” generating plenty of interest, it never actually materialised. Once Bitcoin resolved the scaling issues that were plaguing the community, its dominance soon strengthened. However, it hasn’t reached the dominance it once had.
Scaling issues are still a problem for Bitcoin, and these issues are affecting the Ethereum blockchain as well. Updates are needed for Ethereum to deal with what is essentially a bloated blockchain.
Roger Ver has long described Bitcoin Cash as the true Bitcoin. Despite his commitment, the price of Bitcoin Cash has never come close to flippening Bitcoin. But Ver still maintains that Bitcoin Cash will one day dominate the scene. It should be noted that Ver also once said he anticipates Ethereum overtaking the Bitcoin price.
Ver believes that Bitcoin’s dominance has dropped due to the issues of scaling and the price of Bitcoin transactions rising. This is why he believes people have started to investigate altcoins.
Recent price action has shown Bitcoin dominating altcoins, pushing their price further down. The last altseason peaked when Bitcoin had topped out and retail buyers flooded into altcoins to try and maximise their profit. Many bagholders have since been left with some altcoins looking dead in the water.
The issue for competitors of Bitcoin is that if there is interesting technology on their cryptocurrency, then Bitcoin can look to incorporate the code into Bitcoin. Therefore, Bitcoin can evolve to compete, and it would take something extraordinary for another cryptocurrency to displace Bitcoin.
Bitcoin is one of the only cryptocurrencies to provide a real-world use case and utility. Many other cryptocurrencies are more akin to experiments taking place on a blockchain.
For the foreseeable future, expect to see Bitcoin as the dominant market in the cryptocurrency industry. Should interesting developments arrive on altcoins, the likelihood is that Bitcoin will evolve with the times anyway as it has done so in the past.
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