Bitcoin dominance is the crypto market share of the leading cryptocurrency, Bitcoin, over the rest of the crypto market. The indicator has been fluctuating between a high of almost 96% in November 2013 and a low of 33.4% recorded in January 2018, during the craziest altcoin season.
Following the BItcoin’s Bull Run of 2019, the dominance has risen from 51% at the beginning of the year to nearly 70% as of now. However, a new study suggests that the real dominance of Bitcoin is approximately 90%, a lot more than what we are used to.
Market Dominance Calculated
In order to obtain the percentage of each coin, the circulating supply must be multiplied by the coin’s price and then divided by the market capitalization of all cryptocurrencies. Doing this math shows that Bitcoin has always been the most dominant force in the cryptocurrency community. As per Coingecko, Bitcoin’s market dominance today is 68.13%, which is near to the year-to-date high of 69.73%. However, new research by Arcane shows that different numbers may arise when adding trading liquidity to the mix.
90% Bitcoin Dominance
When liquidity is considered as well, Bitcoin’s presence appears to be even more dominant at around 90%. Liquidity is the key to receiving the most accurate market capitalization numbers as per the person who conducted the research – Bendik Schei, who explains:
“The main reason is that one could easily create a cryptocurrency with 1 billion pre-mined coins, and do one trade at say three dollars each. This would lead to a total market capitalization of $3 billion, which would represent 1% market dominance with today’s valuations and inflate the total market capitalization. The problem is that the calculation does not take liquidity into account. One might be able to sell one token for three dollars, but what happens if you want to sell 1 million? Without accounting for liquidity, market capitalization becomes a meaningless measure.”
What is Left for Altcoins?
By modifying the numbers when liquidity is in the mix, altcoins appear to be in an unenviable position. Even the highest altcoins in regular market capitalization like Litecoin, Ripple, and Ethereum struggle to achieve 10% combined. Schei also added: “Everyday Bitcoin stays ahead, it becomes less likely that any other cryptocurrency can compete as money.
Thrill-Seeking Drives Investors to Trade Crypto, Study Finds
Investors who trade cryptocurrency also tend to take bigger risks in the stock market, suggesting they are seeking dopamine more than diversification, according to a recent study.
The paper, titled “Are Cryptocurrency Traders Pioneers Or Just Risk-Seekers? Evidence From Brokerage Accounts,” appeared in the September issue of Economic Letters, stating that cryptocurrency traders’ behavior is “driven by excitement-seeking.”
“We find that when engaging in cryptocurrency trading investors simultaneously increase their risk-seeking behavior in stock trading as they increase their trading intensity and use of leverage,” the paper says.
Researchers Matthias Pelster from the University of Paderborn, Bastian Breitmayer of Queensland University of Technology and Bond University’s Tim Hasso used individual-level brokerage data to assess the impact of cryptocurrency trading on investor behavior in the stock markets.
The sample period was from Jan. 1, 2014, to Dec. 31, 2017, consisting of 668,067 individual investors.
The study found that on average, traders execute 16.8 additional stock trades and increase their use of leverage by 13.4 percent within the first 10 days after initiating their cryptocurrency activities.
Notably, traders in the age group of 35 to 44 years old increased their leverage the most, followed by 25- to 34-year-old traders.
The pattern of behavior could be associated with the fact that cryptocurrencies are far more volatile and unpredictable than stocks.
For instance, bitcoin, the top cryptocurrency by market value, often moves by more than $1,000 in a matter of just a few minutes. That sudden price volatility is rarely seen in the equity markets.
Also, as the U.S. Securities Exchange and Commission (SEC) stated last week in rejecting a proposed bitcoin exchange-traded fund, the bitcoin market is prone to market manipulation. So, the uncertainty element is high in cryptocurrencies as compared to stocks.
Hence, it’s not surprising that stock traders are more likely to take more risks in equities after dabbling with cryptocurrencies.
The researchers also observed that the increase in risk-seeking in stocks is particularly pronounced when volatility in cryptocurrency returns is low.
That conclusion undercuts the popular narrative that bitcoin is a new safe-haven asset.
After all, if traders viewed cryptocurrencies as a long-term investment avenue or a safe haven asset, then their stock trading behavior should have remained unchanged.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Libra associates got concerned and dropped out: Secretary Steven Mnuchin
Facebook’s Libra initiative hit another roadblock prior launch after Libra associate companies including MasterCard, Visa and Stripe announced dropping out on October 9. While the decision was made after two Democratic Senators asked the the three banking giants to rethink their stance on Libra, speculation around the Senators’ being a threat clouded the crypto ecosystem.
The Secretary of the U.S. Treasury, Steven Mnuchin, featured in a CNBC interview to discuss the happening. Talking about Facebook’s plan to start a cryptocurrency, Mnuchin said,
“We oversee FINSA. You can call that threatening, that if they (Libra associates) don’t meet the AML and FINSA standards, we would take enforcement actions against them.”
The Secretary of U.S. Treasury also mentioned that “Libra realized that they are not ready, that they are not up to par.” Touching upon the back out of financial giants including MasterCard, Visa and Stripe, Mnuchin said,
“I assume some of the partners got concerned and dropped out until they (Libra) meet those standards.”
To this news, one of the crypto enthusiasts on twitter, @OcnadPawnbroker, highlighted that Satoshi would still be waiting to start bitcoin if he needed permission.
Blockstack releases H1 2019 financial statement; has $30 million in cash, crypto
Open-source project Blockstack PBC, which was the first company in the industry to conduct an SEC-qualified token offering in the US, has revealed that it has nearly $30 million in cash and crypto. Blockstack recently published its financial statement for the first half of 2019 in which the firm stated that it estimated a runway at least until the end of 2021 at projected burn rates.
The H1 2019 statement also revealed that the operating expenses were totaled to be around $10.2 million. This was inclusive of one-time expenses, as well as $3.3 million in non-cash expenses. Stating that the figures shouldn’t be misinterpreted, the blog alluded,
“The $10.2 million number should not be confused with our burn for H1 2019 or for future semi-annual periods.”
Further clarifying the $3.3 million in non-cash expenses, the release further stated that ‘non-cash expenses’ essentially meant those expenses which were not related to cash, such as depreciation, amortization, stock compensation expenses etc. The income statement added,
“We do not consider non-cash expenses when calculating burn rate because they do not (and will not) entail cash being spent.”
With respect to one-time expenses, the US-based blockchain startup revealed that of the remaining $6.8 million in operating expenditures from H1 2019, the firm considers certain expenses such as those relating to the Reg A and Reg S offerings, to be excluded while calculating the recurring burn. Hence, there is a significant portion of one-time expenses that the firm is likely to discontinue in the future. Blockstack further revealed that a significant portion of the $2.8 million total expected expense on Reg A offering is an example of such a one-time expense included in the H1 2019 income statement.
Additionally, the company recently announced a partnership with the crypto-wallet platform, Blockchain.com. The crypto-wallet platform will integrate Blockstack’s native Stacks token [STX] into the Blockchain Wallet and Blockchain Explorer for both retail, as well as institutional users.