Bitcoin has been making headlines in the mainstream press over the past couple of weeks due to the recent rise in the exchange rate. After breaking through the $800 mark on December 20th, the price has continued to skyrocket and hit the $1000 mark on New Year’s Day.
For the past few months, bitcoin’s dominance over its competitors has also increased. CoinMarketCap’s Bitcoin Dominance Index (BDI) is a measurement of bitcoin’s share of the overall cryptocurrency market. After flirting with 75 percent dominance of the market in March, bitcoin is now closing in on a 90 percent share of the cryptocurrency market.
Bitcoin started the year with a 91.47% share of the cryptocurrency market.
Bitcoin Rises Despite Scaling Concerns
One of the main criticisms of Bitcoin over the past two years has been that the community will not be able to come to consensus on a plan for scalability. Although a roadmap for scalability published by Blockstream CTO and Bitcoin Core contributor Gregory Maxwell received support from developers who accounted for more than 90 percent of the commits to Bitcoin Core in 2015, a key part of that roadmap, known as Segregated Witness, only recently became eligible for activation on the network.
Every bitcoin wallet of note is either currently integrating or plans to implement this improvement to Bitcoin, although it currently has less than 30 percent of the necessary 95 percent of support from miners for activation.
The issues related to scaling Bitcoin are what led former Bitcoin developer Mike Hearn to refer to the P2P digital cash system as a failed experiment, but the price more than doubled over the course of 2016.
Among those who saw increasing congestion on the Bitcoin network as a possible issue for the bitcoin price were altcoin supporters and proponents of a hard-forking increase to the block size limit.
Ethereum and Steem Continue to Fall
The main reason for Bitcoin’s increased dominance over the entire cryptocurrency market since March has been the decline of Ethereum and Steem.
While the ether market cap increased to over $1.5 billion earlier in the year, it now sits at roughly half that amount. This decline in price has taken place in the aftermath of the fiasco related to The DAO, the hard-forking response to The DAO, and the subsequent creation of Ethereum Classic.
Ethereum Classic’s (ETC) price also doubled in terms of ETH (Ethereum) over the course of December.
The Steem market cap peaked at just over $400 million in July and has since declined to less than $40 million.
Large moves in the BDI over the years tend to be caused by a temporary rise or fall in one or two alternatives to bitcoin. For example, Ripple’s XRP token was skyrocketing when the BDI dropped below 80 percent for the first time in its history. The XRP market cap peaked at over $800 million in late 2014. The current XRP market cap is under $250 million.
Monero a Rare Bright Spot for Altcoins
One of the few bright spots for the altcoin market since March—at least when compared to Bitcoin— has been Monero. The privacy-focused altcoin received a boost in price and market cap after being integrated into Alphabay, which is the darknet’s largest market. The Monero market cap was around $15 million in March, and the market cap currently stands at roughly $175 million.
Alphabay recently claimed Monero accounts for 2 percent of their business.
When comparing cryptocurrencies in a system like the BDI, it’s also important to remember that market caps don’t tell the whole story.