There is no doubt in anyone’s mind that Bitcoin is dominating the crypto market. However, most people don’t actually know why this is the case. This guide should walk you through why Bitcoin is dominating the crypto market. But first, you need to know what exactly is Bitcoin.
What is Bitcoin
The mysterious figure known only as Satoshi Nakamoto introduced the world to bitcoin all the way back in 2009. The originator of this idea has never been positively identified to this day. Bitcoin was initially developed by Nakomoto with the intention of serving as an all-purpose kind of digital cash for the whole human race.
The idea was to eliminate the need for any kind of middleman by having consumers trade value directly with one another. He thought that the present structure of our economy was bound to fail. This was primarily due to the fact that it was dependent on governments and central banks.
His response was Bitcoin, a peer-to-peer digital money with a limited quantity that would serve as a hedge against inflation and open up the internet economy to everybody in the world. He said that Bitcoin was his answer. This is why Bitcoin is dominating the crypto market.
Because of this vision, the project that started out as a side hobby with only a dozen miners and users has grown into a financial system that is worth a trillion dollars and has given rise to an entire industry. Bitcoin was a game-changer in the financial world because it gave people an alternative to relying on banks and governments.
How Bitcoin is Dominating the Crypto Market
If you have been keeping up with the cryptocurrency market, you may have realized by this point that as the price of Bitcoin falls, the prices of other cryptocurrencies also fall in tandem with it. The inverse is also true in exactly the same way.
We anticipate that the prices of alternative cryptocurrencies will increase not long following a rally in the price of bitcoin. But why does anything like this occur? Why is Bitcoin considered to be so vital that an entire industry is following it with such careful attention? How is Bitcoin dominating the crypto market? Let’s find out!
First Crypto Coin
Over the course of its existence, Bitcoin has had to bear a significant amount of responsibility due to the fact that it was the first participant in this emerging market. On the other hand, this has also made it possible for the first cryptocurrency to establish itself as a reliable store of value.
Because of this, its popularity skyrocketed to unprecedented heights. No matter what anyone says, Bitcoin was the coin that introduced traditional people to the concept of cryptocurrencies. Bitcoin’s widespread adoption attributes to the popularity of its super straightforward underlying concept.
This caused its price to skyrocket to the desired level of more than $50,000 that we see today. It created the groundwork for a whole sector of the economy. At this point in time, practically everyone active with cryptocurrency has at least some bitcoin in their possession. It’s important to point out that Bitcoin is the only cryptocurrency whose founder has never been identified in any way; no one knows who created it.
Altcoins are Clones
During the years that followed Bitcoin’s introduction into circulation, there was a proliferation of Bitcoin clones as a direct consequence of the rising popularity and value of the cryptocurrency. Litecoin, for example, was the first alternative cryptocurrency to gain widespread acceptance.
It is based on Bitcoin’s technology and strives to be a more efficient and lightweight version of the original cryptocurrency. There are several other digital currencies that are almost identical to Bitcoin, including Bitcoin Cash, Bitcoin Gold, Bitcoin Diamond, and dozens more. Although each one strives to develop into a cryptocurrency that is superior to Bitcoin, in most cases, they just follow Bitcoin’s example.
The foundation of Bitcoin is a technique known as proof-of-work, which is safeguarded by the participation of over 18 million miners in Bitcoin’s decentralized network, known as the blockchain. This large number of participants has the effect of a high level of decentralization inside the network, which in turn guarantees that the Bitcoin payment system is secure.
The last thing anyone wants is to invest in a coin that can’t guarantee to be a secure network. This is why you see Bitcoin dominating the crypto market. If it wasn’t a secure network, no one would invest in it and you wouldn’t see Bitcoin dominating the crypto market.
Investors generally perceive Bitcoin to be the reserve currency of the cryptocurrency market due to its pioneering significance in the industry. This is why you see that Bitcoin is dominating the crypto market. This is analogous to the role that the USD plays in the global stock markets.
In addition, many cryptocurrency trading platforms do not provide trading of cryptocurrencies for fiat currency since the compliance and regulatory procedures of their respective nations prevent them from doing so. As a result of this, a significant number of investors first put their money into Bitcoin with the intention of exchanging it for alternative cryptocurrencies and making a profit after that.
The vast majority of cryptocurrency traders don’t even bother to compare altcoin prices to those of fiat currencies. Instead, they evaluate themselves in relation to BTC since this is the market pair that has the most significance for them. As a result, it is not at all surprising to observe a general decline in market prices if there is a negative trend in Bitcoin’s market mood.
Why Bitcoin is Dominating the Crypto Market
Bitcoin is neither a currency that is issued by a central bank nor is it supported by any government. Because of this, the instruments of monetary policy, rates of inflation, and economic growth that are traditionally used to determine the worth of a currency do not apply to Bitcoin value. Because bitcoin functions more like a commodity and holds value, the following factors influence the price of bitcoin:
The amount of an asset that is currently available for purchase is one of the primary factors that decide its price. It is more probable for an asset to have high pricing if it is rare, whereas an asset that is readily available will have low prices.
The amount of Bitcoin in circulation is often not a secret. A discovery showed that there would never be more than 21 million made and that there will only be a certain number manufactured each year.
Because of the way its protocol works, new bitcoins generate at a predetermined pace, and you can program the rate to decrease gradually over time. Because of this, the future supply of bitcoin is unknown, which contributes to the rising demand.
The cryptocurrency known as bitcoin has caught the attention of both individual and institutional investors. A rise in the amount of attention it receives in the media is driving up demand for it. It is also driven by financial professionals and company owners praising Bitcoin’s value, both currently and in the future.
Bitcoin has also seen a rise in popularity in nations that are struggling with excessive inflation and currency devaluation. In addition, it is popular with those who use it to move huge quantities of money for the purpose of engaging in dishonest or unlawful acts.
This indicates that a reduction in the amount of bitcoin that will be mined in the future has contributed, along with an increase in demand, to the price increase of bitcoin. Despite this, its price continues to go through phases of prosperity and adversity in alternating cycles.
Bitcoin Production Costs
Bitcoin’s price, like that of other commodities, is largely determined by its manufacturing costs, much like any other commodity. According to the findings of several studies, the marginal cost of manufacturing is directly proportional to the price of bitcoin on cryptocurrency marketplaces.
The production cost of Bitcoin is approximately equal to the total of two components: the direct fixed expenses for the infrastructure and power needed to mine the cryptocurrency, as well as an indirect cost linked to the difficulty level of its algorithm.
The process of mining bitcoins involves a network of people called miners who compete with one another to decipher an encrypted number. The miner who succeeds first receives a reward of freshly created bitcoins as well as any transaction fees that have accumulated since the previous block was found.
Competitor Coins for if Bitcoin is Dominating the Crypto Market
Even though Bitcoin is the most well-known cryptocurrency, hundreds of other tokens are competing for the same amounts that investors put into Bitcoin. As of the year 2022, Bitcoin has established itself as the industry standard for trading in cryptocurrency marketplaces. But throughout the course of time, its preeminence has become less clear.
More than 80 percent of the total market capitalization in cryptocurrency marketplaces was held by Bitcoin in 2017. By the year 2022, that percentage had dropped to less than half. The primary cause for this was a rise in both the prevalence of alternative currencies and the capabilities associated with them.
As an illustration, Ethereum has developed into a serious adversary to Bitcoin as a direct result of the proliferation of decentralized financial systems. Ether (ETH) has attracted the attention of investors because they believe it has the ability to revolutionize the rails of today’s contemporary financial infrastructure. Ethereum is responsible for around 20 percent of the total market capitalization of all cryptocurrency marketplaces.
Bitcoin was available to the public in the wake of a financial crisis. This was a result of a relaxation of restrictions governing the derivatives market. The cryptocurrency itself is not subject to any regulations. Furthermore, the ecosystem surrounding it has earned a reputation for being unrestricted.
There are advantages and disadvantages associated with Bitcoin’s absence of a regulatory status. Because there are no regulations governing its usage, you can trade it freely across countries and it is not subject to the same limitations that are imposed on other currencies by the government.
On the other hand, governments and other interested parties are not stopping their efforts to regulate cryptocurrencies. China banned Bitcoin trading in September 2021. Mining farms in China had to uproot and relocate to nations that are more favorable toward cryptocurrencies. Prices dropped from around $41,000 at the beginning of September to approximately $41,000 at the end of the month. However, once operations got back up, prices soon regained and even surpassed their prior levels.
Media and News
The media and news coverage work both for and against the price of Bitcoin. This is because they are trying to keep investors and other interested parties informed. The general public will know about any new information.
As a result, the price of Bitcoin tends to increase in response to positive news for cryptocurrency investors. Similarly, it decreases in response to negative news. Therefore, Bitcoin is dominating the crypto market by a number of factors. This includes supply and demand, the cost of production, competition, regulatory frameworks, and the media coverage that follows.
Do Bitcoins Have No Value?
The price you pay for Bitcoins is similar to what you pay for any other asset. This is dependent on supply and demand. Some individuals have difficulty comprehending the concept that bitcoins are scarce. They also don’t know that their generation has a cost. This is due to the fact that bitcoins are virtual and only exist within the context of computer networks. They refuse to acknowledge that digital footprints may, in this sense, contain a value. And as a result, they continue to believe that bitcoins are worthless. Many people who are familiar with the Bitcoin system believe that it is valuable.
Why Does Bitcoin Have Value
The digital currency known as bitcoin does not have the support of governing bodies. It also does not have a network of institutions that act as middlemen to facilitate its usage. In the Bitcoin network, the approval of consensus-based transactions is the responsibility of a decentralized network. This network consists of independent nodes.
If a transaction goes wrong, there is no fiat authority. This is a government or another monetary authority that may serve as a counterparty to risk. This is because there is no government or other monetary authority.
However, cryptocurrency does exhibit several characteristics that are typical of fiat money systems. It is difficult to acquire and you cannot replicate it. Though you can execute a transaction called a a double spend. This is the only method that someone would be able to manufacture a fake Bitcoin.
Is it Safe to Buy if Bitcoin is Dominating the Crypto Market
You can purchase Bitcoin on government-approved cryptocurrency exchanges such as Coinbase. The price of Bitcoin is extremely volatile. This makes it difficult to utilize it to either build your assets or protect your wealth. There is no assurance that any refunds will be available to you.
There is an equal chance that you will lose your investment as there is that you will gain profit. Investing in Bitcoin, on the other hand, is no different than investing in any other currency or cryptocurrency. Similarly, purchasing Bitcoin is exactly as risk-free as investing in any other asset that might increase or decrease in value.
Is Bitcoin Dominating the Crypto Market?
So this leads us to think about if Bitcoin is dominating the crypto market. I believe that there is no doubt that Bitcoin is dominating the crypto market. It has the highest trade value of all the cryptocurrencies in the market. No one even comes close to the price of Bitcoin.
It was also the first cryptocurrency ever to exist. Every other coin was based on the system that created Bitcoin. Bitcoin has a super secure network. It is also one of the very few crypto coins that is a method of payment worldwide.
Final Verdict for if Bitcoin is Dominating the Crypto Market
There is no doubt that Bitcoin is dominating the crypto market. This guide should’ve given you enough reasons as to why Bitcoin is dominating the crypto market. However, just because a coin is dominating the market does not mean that it is a good investment.
This is because Bitcoin is already arguably at its peak. It can’t have any major jumps in value. It is always better to invest in a start-up coin. Otherwise invest in one that is considerably smaller than Bitcoin. You have a much higher chance of turning huge profits when this coin finally starts shooting up in the market.