The atmosphere has begun to change with the introduction of institutional bitcoin investors on a more broad scale. The fundamentals driving the crypto market, however, remain the same.
Following bitcoin’s historic price rally doubling its 2017 all-time high (ATH) price, btc dominance has begun to fall. Bitcoin dominance is the percentage of the entire crypto ecosystem that btc represents.
The higher the level of dominance, the larger Bitcoin’s market cap in relation to that of all other cryptocurrencies combined, and vice versa. As Bitcoin continues to cool down and Ethereum and Decentralized Finance (DeFi) heat up, btc is witnessing its lowest market dominance level since September of 2020.
Altcoins Take a Bite Out of Bitcoin’s Dominance
Bitcoin recently hit a peak of almost 70% market dominance. It has now fallen to under 62.5%. When looking at CoinMarketCap’s Bitcoin dominance percentage chart, you can see opposite reactions with bitcoin and ethereum price dominance.
When Bitcoin dominance fell, Ethereum’s total market dominance grew by about 11% to over 16.5%. As the hype around Bitcoin settles and the price begins to stagger, more investors migrate towards ETH.
DeFi May Be Pushing Adoption
With a whole swathe of new investors getting involved in the crypto space for the first time, many are now discovering the capabilities that Ethereum can offer. Compared with the traditional financial system, ETH offers some unique solutions.
2020 saw DeFi explode, with less than $1 billion in Total Value Locked (TVL). That number is now over $25 billion. The introduction of new decentralized exchanges, lending and borrowing platforms, insurance coverage platforms, and more, has breathed a new life into Ethereum.
The solutions show the world what the smart contract platform is capable of. Even with relatively slow transaction speeds and high transaction fees, the DeFi sector has solidified itself as a value-added and competitive market.
Countless new platforms have grown on Ethereum, some processing billions of dollars worth of transactions every day. Developers launch new projects on a regular basis.
Many DeFi platforms are also seeing their native cryptocurrencies hit all-time high prices. This is slowly chipping away at btc’s dominance, a factor that partially explains the percentage fall.
As more users get acquainted with Ethereum, Bitcoin market dominance may continue to falter.