A new tool calculates Bitcoin's market share among other Proof-of-Work coins, excluding coins issued by a centralized entity.
Jordan Tuwiner, the founder of Buy Bitcoin Worldwide, launched Bitcoin Dominance last month to focus on providing a more accurate estimation of Bitcoin’s leadership over other cryptocurrencies. His effort cuts out all centralized altcoins, ICOs, and stablecoins from the index in order to provide a better overview of the market.
We sat down with Tuwiner this week to better understand his motivation behind creating the free online tool, especially as popular alternatives exist.
Dominance refers to the percentage ratio between Bitcoin and the cryptocurrency market’s 2,500 altcoins. So far, only a few tools, such as CoinMarketCap and Coingecko, calculate this aspect, with Bitcoin usually commanding over 60% of the market and altcoins making up the remaining.
But for Tuwiner, the metric is flawed. Bitcoin, in his view, accounts for a much higher percentage of the overall crypto market, which existing tools fail to capture.
“With more and more tokens going up on market cap sites, the ‘dominance’ was constantly lowered and was becoming less accurate. Some people just want this answer: ‘Among coins trying to be money, how is Bitcoin doing?’ And our Dominance Index answers that,” he told the BTC Times.
Meanwhile, the entrepreneur was quick to point out initial coin offerings (ICOs) and obscure altcoins as two major concerns behind the creation of Bitcoin Dominance.
“The issue with ICOs is that they are centrally controlled. Let's say a Bitcoin exchange releases stock legally via a token. Other dominance indexes would likely include that in their index. If so, then why not include the whole stock market,” said Tuwiner.
“ICOs or stocks that are tokens are not trying to be money, and therefore should not be measured in a dominance index with Bitcoin. Bitcoin is competing as money and not as stock or a token.”
Bitcoin Dominance only tracks Proof-of-Work coins “attempting to be money.” These include Monero, Zcash, and Bitcoin forks like Bitcoin Gold, as well as a number of other coins. For Tuwiner, these are the “only ones capable of becoming global money replacements” someday.
Fiat-backed stablecoins don’t make the replacement list in Tuwiner’s books. He explained:
“If Tether releases $10 billion new tokens, that eats into Bitcoin's ’dominance.’ In reality, Tether is not a competitor to Bitcoin since it's not decentralized. Its value is based on the value of the USD and trust in Tether.”
The fallacy extends to artificially inflated ICOs infamous for raising hundreds of millions of dollars in 2017 and 2018. Tuwiner noted:
Centralized ICOs can also pre-mine coins and create artificially high market caps. Let's say an ICO releases 100,000 tokens at a $100 value. That's a $10,000,000 market cap. But let's say only 50,000 are publicly available, while 50,000 are held by the founder. This means the true market cap is artificially high since the actual available supply is not really 100,000 tokens, but 50,000. There are likely hundreds if not thousands of coins on most dominance indexes that are artificially inflated like this.
The discrepancy seems perpetual. Data on Bitcoin Dominance reaches a low-point of 50% for the time during the ICO boom of 2017, while CoinMarketCap showes 32% for the same date.
So far, the Bitcoin community on Twitter has reacted warmly to Tuwiner’s creation, with community consensus settling on it being a "serious, much needed" tool and one user even calling it the "best thing since sliced bread."
At the BTC Times, we decided to responsibly cover news about altcoins from time to time, provided that we consider them relevant for Bitcoin or interesting for our readers. The goal of these articles will always be to inform, explain, clarify, debunk, and expose, sticking to the objective facts and qualified technical opinions, and never to promote, advertise, or legitimize "coins", "tokens", or other investment propositions.