In the current cryptocurrency market, there is a slight but certain shift: Bitcoin (BTC) is becoming less dominant, with the progressive development of other cryptocurrencies and protocols – look to the recent DeFi upheaval, if you want an example.
But even so, if we were to take a look at the charts, it would be easy to see that in terms of the total market capitalization, Bitcoin still holds about 60 per cent of the market. Despite the turmoils of 2020, this massive advantage hasn’t changed. So I doubt that, in the near future, anything could push Bitcoin to secondary roles.
Here, we can draw an analogy with the US dollar — there are no signals that would indicate upcoming major changes. The BRICS countries wanted to come together and create a separate payment system to counterbalance the dollar, but a realistic solution has yet to emerge. The majority of transactions around the world are still conducted in dollars, and despite attempts to create alternative ways of paying for services and goods, the dollar continues to dominate the world.
For Bitcoin, it can be extremely hard to overcome the first mover advantage and influence. Based on this, it is difficult to expect a radical change in the situation.
CBDC’s potential to change the financial landscape
Another important aspect that could potentially influence the crypto market is the advancing focus of various countries on digital currencies tied to fiat money.
Today, there is a race among different central banks across the globe — everyone is eager to introduce their own digital currency. We have the Bahamas and China as the front runners, with the former having already introduced the new “Sand Dollar” recently and becoming the first mover in this field, and the latter testing out its digital yuan.
At the same time, Sweden is working towards developing an e-krona, the EU is conducting research into potentially introducing a digital euro in 2021, the US and the UK have their own considerations in this direction, and the list goes on.
Even so, CBDCs are still a fresh concept — there are many potential avenues for developments in the field. Which is why it is quite hard to make any predictions as to how they would influence both the traditional financial market and the cryptocurrency market alike.
But personally, I believe that introducing central bank digital currencies will help lead the global payments industry in a positive direction. The turmoil of 2020 has fueled an increased demand for digital, cashless payments. In such circumstances, it is sensible for central banks to focus on developing CBDCs, and it is highly unlikely that governments would allow for them to be introduced without sufficient proof that they won’t put the national economies at risk.
If state digital currencies do get introduced on a worldwide scale, it would have to be as a reliable and efficient service the average consumer would be able to put his faith in.
In addition, since baseline cryptocurrencies are still far from mass adoption, the emergence of national digital currencies in the market would allow billions of consumers with no relation to the crypto industry to become familiar with the concept of digital money, which is likely, in turn, to accelerate mass adoption of cryptocurrencies.
To sum things up, it is undeniable that the crypto market is developing at a rapid pace, with new elements constantly emerging. But despite that, Bitcoin still holds the top spot by popularity and influence among its fellow cryptocurrencies. And it is unlikely that anything could shake its dominance any time soon.
NOTE: The views expressed here are those of the author’s and do not necessarily represent or reflect the views of BeInCrypto.
Written by Konstantin Anissimov, executive director at crypto exchange CEX.IO, where he is responsible for customer relationships with institutional and VIP clients, overseeing the creation of the company’s development strategy, new products, markets and partnerships. Konstantin completed the Executive MBA program at the University of Cambridge, and has a strong technical background in web-development and Ethereum blockchain. Konstantin has extensive experience working with various markets across the world, including the UK, EU countries, China, South East Asia, South Africa.