Bitcoin Dominance and The Case of Altcoins - Market Dominance Analysis

Up until 2017, Bitcoin (BTC) trading and investment dominated the entire cryptoasset market to an overwhelming degree. Before then, Bitcoin rarely ever dipped below 90% dominance of the market.

Dominance over time(source: Coinmarketcap.com)

Something clearly changed, however, in 2017. The balance began to shift abruptly and dramatically. Within five months, from February to July, Bitcoin´s dominance fell nearly 50%, to below half of overall dominance.

Bitcoin dominance transformed(source: TradingView.com)

This was the first “alt season,” and a couple more followed throughout 2017-18. Intense volatility provides opportunity for huge profit - and loss - during these periods. Thus, they have become the object of intense anticipation.

History on the Charts

Since these pseudo-cyclical events began in 2017, they have laid plenty of digital ink on the charts with which to graph a market structure.

We can see where these “alt seasons” have come, by looking at both the Bitcoin dominance chart, and the “Other” dominance chart, which is comprised of the basket of altcoins excluding the most popular and well funded ones; like Ethereum, Litecoin, XRP, or NEO. These charts are inputted through data from CoinMarketCap.com.

Can alts get a bounce or what?(source: TradingView.com)

There have only really been three of these periods, and the first was the biggest and most profitable (or destructive) for portfolios - giving rise to a sort of myth of an event that has never since repeated itself at the same scale.

We can see that the Other dominance is reaching an historically low point, at about 5.5% of market capitalization. Although simplistic, and despite a widespread belief that dominance charts should not be charted like price charts, we clearly see a falling wedge pattern which has led straight into this very low level.

Bitcoin dominance, charted(source: TradingView.com)

Looking at the Bitcoin dominance chart, we see the obverse side of things. BTC dominance is currently trending in an area not seen since 2017, harkening back to a different era in crypto. Intuitively, we could vaguely expect that dominance is too high here at will get rejected.

ICO Era

Many surmise that the thing that changed, and caused a shift in the nature of crypto market share, was the era of Initial Coin Offerings or ICOs. These became popular in 2017, especially because of the newly pioneered technology of smart contracts on the Ethereum blockchain.

ICO landscape has changed a lot(source: Coindesk.com)

We can see on this chart, compiled by Coinbase, something like a boom period. The number of ICO projects exploded in 2017 and peaked late in that year, which resulted in all of the alt seasons - and culminated in the last real one, in the very beginning of 2018.

This era seems over now, as ICOs, hounded by national regulators - especially in the U.S. - for possible securities violations, have given way to a diminishing number of higher-profile projects. Security Token Offerings (STOs) and Initial Exchange Offerings (IEOs) have filled in the void left by ICOs’ departure from the scene, and these new projects are often open only to private, government-approved investors - like in the case of Telegram’s 2018-19 sale.

Between the charts and the ever-changing crypto investment landscape, it is an open question whether Bitcoin’s current presence at an inflection point on the dominance chart will actually result in an inflection. Although investment into crypto projects is probably only getting started, the ICO era of yesteryear is surely gone - at least in that form.

And without this key mechanic, the source of the next alt season is unknown - and it perhaps foolish to assume one will come again soon.