The market capitalization of an asset is the price per unit multiplied by the number of units outstanding. For example, if there are 19 million bitcoin outstanding and the price of each bitcoin is $20,000, the market capitalization of bitcoin would be $380 billion.
While there are over 20,000 cryptocurrencies tracked by coinmarketcap.com today, bitcoin and ether dominate the market. With the market recently just over a total market capitalization of $950 billion, the combined value of bitcoin and ether exceeded $560 billion, or about 58% of the total market. Bitcoin dominance is the percentage of the cryptocurrency market capitalization held in the value of bitcoin. Recently, 43.4% of the value of the entire cryptocurrency market was held in bitcoin, while 15.6% was held in ether.
Bitcoin was the first successful cryptocurrency and remains the largest part of the market today. Before the launch of the Ethereum blockchain in 2014, bitcoin was reliably between 80% and 90% of the value of the entire cryptocurrency market. In fact, many refer to bitcoin as the original cryptocurrency and all 20,000 other digital assets are referred to as altcoins, or alternative coins to the original.
The dominance of bitcoin and ether vary over time. In December 2017, bitcoin comprised 60% of the market while ether was worth 11% of the total market capitalization.
Altcoin season is a period of time, often in a strong bull market for cryptocurrencies, where the portion of market capitalization controlled by altcoins is rising. An alternative way of describing altcoin season is a time when bitcoin dominance is falling and altcoin prices are outperforming the price of bitcoin. During 2017, bitcoin’s dominance fell from 86% to under 40%, as the value of ether grew substantially and the market was filled with initial coin offerings (ICOs) which launched many new cryptocurrencies and digital assets. During the 2018-2019 crypto winter, bitcoin reasserted its dominance by outperforming the rest of the sector to regain a dominance of almost 70% by September 2019. Altcoins staged a comeback in the bull market of 2020-2021, a time when bitcoin dominance returned to 40% of the crypto market.
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