What’s Behind Bitcoin’s Skyrocketing Dominance?
As the bull run for the cryptocurrency market continues, Bitcoin experiences a sudden increase in its dominance that cements its position as the king of coins.
Over the past few months, the entire cryptocurrency market experienced a large cash injection of over $200 billion, putting it in a solid bull run that’s ongoing.
Less spoken about, but perhaps more interesting, is the fact that Bitcoin itself has risen to a level of dominance that hasn’t been seen since early December 2017, sitting comfortably at 61.7%.
The chart above, provided by CoinMarketCap, shows just how Bitcoin’s reign was beginning to be pushed aside by other entrants into the cryptocurrency space, only to experience a resurgence that solidifies its throne in the vast crypto empire.
But what could be causing this?
A quick look at adoption
Although there’s always talk of market manipulation when it comes to financial ecosystems as unsupervised as Bitcoin’s, one cannot discount the fact that there have always been waxing and waning trends in its adoption.
Because the coin itself is harder to spend, its value has largely been influenced by speculators, excluding the period when early adopters and enthusiasts dominated the marketplace in the early years. This led to a certain level of volatility due to most transactions being related to speculation rather than the exchange of Bitcoin for goods, creating a certain amount of organic growth.
This explains why the number of wallet addresses exploded in late 2017 when Bitcoin was edging towards $20,000. Only a month later, the price completely deflated and 2018 saw one of the most stagnant bear-ish markets for the coin.
However, through 2019, at least part of the newfound growth the cryptocurrency is experiencing can be attributed to an increase in the ease of adoption. For example, only a few months ago, Coinbase and VISA decided to shake hands on a deal that would allow people to use a debit card to make purchases in cryptocurrency even in places that only accept fiat.
More evidence can be seen in BitInfoCharts’ data on how many active addresses Bitcoin has over time.
The large bump in the graph represents the sudden upshoot in the number of active addresses during Bitcoin’s explosive bull run in late 2017. However, in 2019, a more gradual increase appears.
It’s still too early to say whether the majority of the coin’s growth is due to organic adoption, but there’s enough data to prove that some of the newer developments that made Bitcoin more adoptable have had, at the very least, a partial influence in its growth in value and its dominance in the market.
It’s also very much possible that the growth will encourage speculators to once again invest heavily in Bitcoin with high hopes, creating a situation that exceeds the dramatic shifts seen in late 2017 and early 2018.
Whether this is a good thing or a detriment for the cryptocurrency space is still up for debate.