Abstract

The Bitcoin Leading Index refers to the share of the earliest cryptocurrency BTC in the market capitalization of the entire cryptocurrency market. Since its inception in 2009, Bitcoin has been the only digital asset in existence for quite some time, naturally accounting for the entire market capitalization of the cryptocurrency market on its own. However, times have changed. In 2013, the first wave of altcoins appeared on the market, injecting new value into the market capitalization of the cryptocurrency market. In 2015, Ethereum was launched, and Bitcoin’s strong rival Ethereum appeared on the scene. Then in 2017, a surge in initial coin offerings (ICOs) caused the BTC Leading Index to further dilute and hit an all-time low, only to rise back above 50% just a few months later. Today, BTC’s leading index faces fierce competition from DeFi, NFT and Metaverse tokens, as well as more than 20,000 non-Bitcoin cryptocurrencies.

Introduction

World Cryptocurrency" The originator of Bitcoin was launched to the public in 2009 by a developer or developer group anonymously named Satoshi Nakamoto. Since then, despite constant competition, Bitcoin’s share and value have remained the highest in the world. Bitcoin's underlying technology has inspired the development of thousands of emerging cryptocurrencies, all collectively known as tokens or altcoins.

Compared with other digital assets, Bitcoin still has a high weight and is the weathervane of the entire cryptocurrency market. Traders and analysts use the Bitcoin Leading Index, also known as the "BTC Leading Index," to measure Bitcoin's market capitalization within the larger cryptocurrency market.

What is the BTC Leading Index?

BTC leading index refers to the proportion of Bitcoin in the overall market value of the cryptocurrency market, using BTC market value Calculated by dividing the total cryptocurrency market capitalization.

Why is the BTC leading index important? Traders have long used the BTC Leading Index to benchmark Bitcoin to determine whether altcoins are in an upward or downward trend. One of the mainstream views is that if altcoins trend upward, the cryptocurrency market will enter a bull market. For example, in 2017, the sharp decline in the BTC leading index coincided with the surge in altcoin prices (rather than the decline in BTC prices), and the timing coincided with the entire market entering a bull market.

The development of cryptocurrencies from one to a thousand

2011 In 2016, Litecoin, the first altcoin, was launched. In 2013, Forbes magazine called that year the “Year of Bitcoin,” and the number of emerging altcoins entering the market began to increase rapidly. As of May 2013, at least ten tokens have appeared in the cryptocurrency market, including Litecoin (LTC) and Ripple (XRP).

At the same time, as more and more investors get involved in the field of digital assets for the first time, the price of Bitcoin is gradually soaring. However, even with the strong rookie competition, the BTC leading index still occupied around 95% during this period.

The advent of Ethereum

In 2015, Vitalik Buterin led the development team to launch the Ethereum (ETH) network. Ethereum competes with Bitcoin, aiming to build a blockchain that not only meets financial services such as fund transfers, but also has rich use cases. Bitcoin has remained unaffected by competition from Ethereum’s native token, Ethereum (ETH), and continues to account for 90-95% of the cryptocurrency market. It was not until 2017 that the situation changed with the rapid development of initial coin offerings (ICOs).

Initial Coin Offering (ICO) Craze

Initial Coin Offerings (ICOs) are a popular crowdfunding method for early-stage cryptocurrency projects and became a mainstream trend between 2017 and 2018. During this period, approximately 2,000 independent ICO projects have emerged, raising more than $10 billion in cumulative funding. Funds began to flow from Bitcoin to many of the emerging altcoins that are now emerging. While some investors are optimistic about some interesting but untested use cases, another wave of investors is more interested in profiting from wildly volatile prices.

Altcoin competition has been unprecedentedly fierce, causing the Bitcoin leading index to fall sharply for the first time, falling to about 37% in January 2018. All time low.

The Cryptocurrency Winter of 2018

While the initial coin offering boom gained widespread attention in the cryptocurrency space, it was ultimately short-lived. Investors are increasingly realizing that many ICO projects either lack core fundamentals or have questionable business practices. Some projects have even been targeted by U.S. regulatory scrutiny and other authorities. This escalation of negative sentiment eventually enveloped the entire industry, sending prices across the cryptocurrency market into a prolonged period of price decline and stagnation.

Bitcoin market rebounds

Many altcoins are declining in value, and investors are generally disenchanted with initial coin offerings. By the last few months of 2018, the BTC leading index gradually climbed back above 50%.

Bitcoin prices recovered slightly in 2019, trading around $7,000 at the end of the year, while the BTC leading index reached in September reached a peak value of about 70%. However, before the COVID-19 epidemic ravaged the world in 2020, the market for digital assets remained relatively static.

The market under the epidemic

Since 2020, after experiencing a short-term comprehensive decline caused by the impact of the epidemic, the cryptocurrency market has ushered in an unprecedented bull market. Meanwhile, the BTC leading index reached 72% in January 2021, a new high since 2017, before falling to 39% in mid-2021.

Under the lingering epidemic, people stuck at home with nothing to do are turning to day trading and investing to pass the time. . At the same time, in order to alleviate the economic downturn caused by the epidemic, governments around the world have issued cash subsidies to stimulate the deeply troubled economy. For the first time, retail traders are investing a larger proportion of their funds in the stock, forex or cryptocurrency markets.

In the second half of 2020, as the media collectively focused on the cryptocurrency field, high-risk altcoins gradually gained widespread attention from retail investors, seeking Novices who can make quick profits are even more eager to do so. For example, in 2021, the price of Shiba Inu Coin (SHIB) soared more than 4,000 times.

In addition, decentralized finance (DeFI) and NFT mainly exist in competing platforms such as Ethereum and Solana (SOL) In the blockchain, the rapid development of these innovations has caused Bitcoin to lose a large market share. For example, Solana’s underlying technology has gained the attention of many institutions and retail investors, and its price has skyrocketed from $1.50 to an all-time high of $250 in 2021.

Since then, the BTC leading index has always been difficult to climb above 50%. The recent slow growth of the BTC leading index may be related to ETH 2.0, Ethereum’s long-awaited proof-of-stake shift, and the continued bear market.

Conclusion

In recent years, the development of the altcoin market has diluted Bitcoin’s market share. Unlike its early days when it had few competitors, Bitcoin now faces fierce competition from DeFi tokens, the popular NFT space, and thousands of other cryptocurrencies.

Even so, Bitcoin is still the cryptocurrency with the largest market value, and the BTC leading index is unlikely to disappear out of thin air in the short term. First of all, the supply of Bitcoin is limited, and many investors regard it as a means of saving value, so it is known as "digital gold."

The most important thing is that as the first cryptocurrency in the history of the industry, Bitcoin’s status cannot be shaken, occupying a leading position in the digital asset market Absolute competitive advantage. But based on past experience, as long as an innovation comes out, this first-mover advantage will not last long. Let us wait and see whether other cryptocurrencies will emerge to shake the current status of Bitcoin and dominate the cryptocurrency market.