A study conducted John-Paul Thorbjornsen has found that while bitcoin’s percentage of the total cryptocurrency ecosystem is slightly above 50%, its dominance over it is well over the 80% market. This, if in ‘dominance’ we include factors other than market cap.

Bitcoin dominance by volume-weighted cap

Through a Medium post, Thorbjornsen revealed the flagship cryptocurrency’s market cap isn’t a good metric to measure its dominance in the market. Various analysts in the space have notably pointed out market cap can be easily manipulated, as it’s simply a crypto’s market price multiplied by its circulating supply.

The operators behind a crypto can, as such, manipulate its market cap through its supply, through pre-mines, and more. To better get to BTC’s dominance, Thorbjornsen used the Pareto principle.

This principle, also known as the 80/20 rule, states that in most cases it’s worth assuming 20% of the causes are responsible for 80% of the outcomes. In this case, it would mean 20% of cryptocurrencies should dominate 80% of the market.

In his research, Thorbjornsen looked at the top 100 cryptocurrencies by market cap on a logarithmic scale, and found their trading volumes didn’t correlate well. Some of the tokens looked into even had less than 0.1% of the crypto market’s daily trading volume, suggesting an artificial market cap.

Volume-Weighted Cap

The researcher further multiplied cryptos’ volumes by market cap, creating a new metric he called ‘volume-weighted cap’. He then found there was a power law distribution among them, and removed the bottom cryptos over what he called a “page 1 effect,” associated with the attention tokens get on the first page of CoinMarketCap.

Using this new metric, he found bitcoin’s dominance over the cryptocurrency ecosystem was, in fact, well over 80%, and trending up. He noted:

In fact, just taking into account the Top 5 coins, Bitcoin (the 20%) captures over 85% of the market — thus it is a Pareto distribution, and actually much stronger. This is only testament to how strong the Schelling Point around Bitcoin is.

He concluded, as such, that the “Bitcoin Dominance” shown on CoinMarketCap and other cryptocurrency data aggregators is “flawed as it doesn’t factor in liquidity. This means, per his words, the 55% dominance is “significantly understated.”